New construction loan reaches highest value in at least 8 years

2024-09-05 09:25:00, Ekonomi CNA

Credit to the construction sector has returned to growth this year and has touched the highest levels for at least the last eight years.

According to Bank of Albania statistics, for the first seven months of the year, the value of new loans for this sector reached 28.4 billion ALL, 39% more compared to the same period last year. In total, the active loan portfolio has reached the value of about ALL 76 billion, increasing by 7% compared to a year ago.

The record numbers of construction loans are following the positive cycle of the sector, which in recent years has been among the main contributors to economic growth. Also, construction seems to be one of the sectors that is supporting the rapid growth of lending to the economy this year.

However, to a significant extent, this increase may also be related to the financing of important road infrastructure projects, of the public-private partnership type.

Thanks to a fairly positive financial performance in recent years, the banking sector has increased its appetite for risk and is appearing ready for large exposures in corporate loans.

As for residential construction and real estate in general, the banking sector, credit in recent years has experienced a new cycle of growth, driven by developments in the real estate sector, especially in the capital and the coast.

New construction loan reaches highest value in at least 8 years

Source: Bank of Albania

Last year, lending to this sector suffered a kind of inhibition, also related to the cycle of interest rate increases and the slowdown in price growth. However, this year it seems that business and the banking sector have been engulfed by a new wave of optimism, which is evident from the very high rate of credit growth.

The rapid growth of credit, however, seems to be worrying the Bank of Albania. In the last Statement of Financial Stability, on Wednesday, the Supervisory Council emphasized that the cycle of rapid credit growth should slow down. For this purpose, in June the Governor also decided to apply for the first time a countercyclical addition to the capital adequacy ratio of the banking sector.

According to data from INSTAT, the supply of constructions continues to be high. The number of construction permits has decreased and for six months a total of 938 construction permits were granted, 29% less compared to the same period a year ago.

However, the total area of ??approved permits has increased by 13% compared to the same period of the previous year. The value of new constructions, based on permit data, has also increased, by 4.2% more compared to a year ago./ Monitor.al