Albania and the Global Economic Crisis
10 October 2008
Our inbox is full at the moment of emails from our clients and prospective clients all asking one question-
“How is Albania being affected by the financial breakdown shaking US, UK, Europe?”
My first response is – just remember – the press are reporting on the very worst and paying little attention to all things good and profitable in the world at the moment.
My second response is – it’s important to remember, that the markets most affected by these events are highly leveraged, highly mortgaged markets relying on borrowed money or financial products tied to borrowed money.
Now, looking at Albania, of course there are some links from Albanian banks to banks in Italy, Greece, Austria and Bulgaria, which are linked to major banks including US banks. However, being banks in an emerging market like Albania, most have done due diligence and have been proceeding very carefully. Does this make the banks or the Albanian economy immune? Definitely not.
There will be some fall-on effect and most likely a tightening in lending personal and mortgage finance at the riskier end of the scale – to foreigners.
But luckily the housing market is a low cost, cash financed market at the moment. Current resales and most offplan projects are correctly priced and relative to demand, and prices will continue to rise.
An example of this is a project we have been marketing – Kashar View Apartments in Kashar, Tirana. During the crisis in August, the developer was selling up to 20 apartments a day to locals, with some locals buying more than one apartment. Now 80% of the project is sold out.
Why is this? Well Albania’s economy is doing very well, and the locals are aware of this. Tirana, the capital city, is changing on a weekly basis. In the lead up to the next election, the government is extremely busy – improving roads and services, new schools are being constructed, a new huge hospital is under construction in Kashar, and buildings continue to be painted a variety of creative colours. The masterplan for the city will see an amazing new ring road being constructed which will improve access and traffic flow enormously. And some construction teams improving the roads are currently working through the day and night.
More information on Albania’s economy coming soon…
Unlike other countries in Eastern Europe or the Balkans, Albania’s population will continue to rise. As the economy improves, new companies set up offices and branches, and Albanians will return from abroad to take advantage. So the property market will continue to grow under this demand.
Also as a holiday destination, this is one of Albania’s greatest untapped resources. 2008 was one of the busiest summer’s ever, with accommodation and facilities being pushed to their limit on the coast – Saranda, Vlora and Durres.
Experts believe the increased numbers had to do with many reasons including Albania being incredibly affordable as a beach destination, compared to neighbouring Greece, Montenegro or Italy. And of course this demand will mean hotel rates will continue to rise, seen by the increase of up to 30% this summer. Meaning demand for apartments will be greater than ever.
Anyhow, back to the banks, who only continue to generate huge incomes in Albania. They do this through ways we take for granted in the UK and Europe. They are charging:
· transfer fees to transfer funds from bank account to bank account
· for new services, like e-banking
· for account keeping fees
And the mortgages currently offered, are safely above the Euribor rate, as an extra buffer.
In summary, Albania will continue to growth, despite world events. The population is going up, wages are going up, unemployment is going down, company taxes are very low, infrastructure is improving, FDI is going up and the scenery and coastline is just stunning.
If a property investor waits for the global economic crisis to settle, they may just miss out on the best property investment opportunities in Europe.
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