Over the past two decades, Albania\u2019s construction sector has produced a deeply divided landscape. On the one hand, the formal housing supply, as measured by official permits, has remained limited at the national level. On the other hand, the reality measured by the Census shows a much larger increase in the housing stock, while the number of households has declined by tens of thousands. This mismatch is not accidental: it reveals a model in which construction follows the logic of capital\u2014remittances, deposits, foreign investment, and informal flows\u2014rather than domestic demographic needs.<\/p>\n\n\n\n
The Demographic Mismatch Index<\/em> shows that market supply is taking place where the number of households is declining.<\/p>\n\n\n\n By combining the change in the number of households (2005\u20132025) with the exact cumulative number of new dwellings according to official permits, the Demographic Mismatch Index is derived. The higher the index, the greater the mismatch, meaning excessive construction relative to household dynamics.<\/p>\n\n\n\n At the national level, the decline in households is estimated at between \u201345,000 and \u201355,000, while formal new dwellings reach 16,845. The national index stands at around 0.34. This means that formal supply is relatively high compared with demographic contraction, but is geographically concentrated.<\/p>\n\n\n\n The index table reveals \u201ctwo Albanias\u201d in terms of construction: one urban and coastal, driven by investment and tourism; the other peripheral, characterized by deep demographic decline and limited activity. Formal permits explain only around 11.5% of the actual increase in the housing stock measured by the Census. The large difference\u2014around 88.5%\u2014is attributable to construction outside the formal registry.<\/p>\n\n\n\n Who Creates Demand and Who Finances It?<\/em><\/p>\n\n\n\n Demand for new construction does not primarily come from household growth, which is negative in most counties. It is shaped by internal migration, income, credit conditions, profit expectations, tourism, and the replacement of the existing housing stock. The three main groups of actors are households, businesses, and investors.<\/p>\n\n\n\n A decisive factor is external demand: non-resident buyers, including members of the Albanian diaspora and foreign nationals. They purchase for second homes, investment, short-term rental, or capital preservation. The impact is strongest along the coast\u2014Durr\u00ebs, Vlora, Sarand\u00eb, and Himar\u00eb\u2014where mismatch indices are higher. In Tirana, concentrated domestic demand dominates, supplemented by emigrants. In inland counties, construction remains more household-oriented and financed by remittances.<\/p>\n\n\n\n The financing structure of purchases (indicative estimates for 2020\u20132025) shows that regular wages are the weakest source:<\/p>\n\n\n\n Bank deposits are concentrated approximately 54% in Tirana and Durr\u00ebs, creating strong leverage in these counties. Informal flows create an \u201cinformal premium\u201d in prices and pose a challenge to transparency.<\/p>\n\n\n\n Affordability Ranges between 11 and 26 Years of Income<\/em><\/p>\n\n\n\n The affordability ratio\u2014the price of a 65 m\u00b2 dwelling divided by annual income\u2014reveals the depth of the gap:<\/p>\n\n\n\n Even with the full combination of available sources, affordability remains low for ordinary households. The Social Beneficiary Index indicates that in Tirana and coastal areas, 65\u201378% of purchases are made by the upper-middle class, investors, and non-residents. Only 22\u201335% of the market remains accessible primarily through regular wages.<\/p>\n\n\n\n The average apartment price in Tirana doubled from approximately \u20ac916\/m\u00b2 in 2016 to \u20ac1,833\/m\u00b2 in 2025, while wage growth was much slower. The indicative affordability index by county (60 m\u00b2 apartment, 2025) places Tirana and Vlora in the \u201ccritical\u201d category (16\u201317+ years), Durr\u00ebs in the \u201chigh\u201d category (14 years), while peripheral counties show lower nominal figures but have substantially lower absolute incomes.<\/p>\n\n\n\n Who is left out?<\/em><\/p>\n\n\n\n Four groups face structural barriers:<\/p>\n\n\n\n The overlap of these groups produces the segments most exposed to exclusion from home ownership.<\/p>\n\n\n\n Risks and Scenarios to 2030<\/em><\/p>\n\n\n\n The current model carries clear risks: high municipal dependence on revenues from construction permits, oversupply risk in premium segments, widening regional inequalities, and continued dependence on remittances and informal flows.<\/p>\n\n\n\n Three main scenarios emerge:<\/p>\n\n\n\n The key factor is not only the mismatch index, which is sensitive to its denominator, but the degree of fiscal transparency and traceability.<\/p>\n\n\n\n To change the trajectory, structured measures are required<\/strong>:<\/p>\n\n\n\n\n
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