Why are housing prices falling?

The private apartment market in the country has stalled in recent months.

Buying a new apartment in Albania, but especially in Tirana and cities where there is a lot of construction, is a difficult task and is particularly challenging. The biggest difficulty is that once you have secured a source of financing (a challenge that is becoming impossible for most young families) you need to know how much you need to spend on your new apartment when prices can change drastically.

The affordable apartment that may have appealed yesterday may not be as affordable or even livable today.

In addition to constructions without any criteria that respect the urban rules, it happens that the prices themselves do not respect the market rules, those of demand and supply, as they are influenced by many factors, where a major part of them is also related to reasons of informality and corruption.

The biggest factor in the recent housing price declines in Tirana is a glut of new units in 2023 and before, according to a logic that is based on the intensity of building permits. The current construction boom in the country is the biggest in the last 20 years.

The second factor weighing on this current decline is related to money laundering scandals that have even become a popular search term on Google. For years, developers, agents, bankers, appraisers, and lawyers have facilitated deals from “wealthy buyers” to purchase luxury apartments and commercial properties in Tirana. Builders seem to have sold their projects well in recent years. Real estate agents pocketed their commissions. Central and local governments charge their own fees. Then everyone suddenly probably realizes that this is dirty money flowing into Albania due to money laundering by a group of developers of the construction market, with a brief history of activity.

Another factor is also due to an “affordability crisis” caused by high living prices for most of the population, as well as an increase in unemployment, but also lower disposable income due to inflation.

Meanwhile, the current chaos in the registration of properties in the property registration offices has influenced the slowing down or the blocking of the sale and purchase of real estate, an element that indirectly affects the price.

This is a story of supply and demand where the demand is easing a little and the increase in the supply is increasing, which is the same for Tirana and everywhere where it is being built in excess as in all other countries.

However, the demand for apartments is having an impact, but a good part of the market is already hostage to more economic uncertainty, where people are probably thinking twice about moving to a better apartment, but also not looking to increase spending in conditions where credit has become more expensive and their savings in foreign currencies have depreciated by at least 12% from last year.

Believe it or not, the time of year can affect apartment prices as well. In general, if an apartment is likely to sell in the winter, the price is likely to be lower than in the summer. This is because the peak season for buying and selling, as in all other countries, is usually between April and October.

While the demand for an apartment in winter is lower, the price will also be part of this demand and will be subject to reduction. However, this is because the supply (offer) is also lower, so there may not be as many options.

Meanwhile, an economic growth based on the contribution of many sectors affects the market with the same intensity as the income of customers. A strong growth market is great for the local economy.