Builders predict 15% increase in apartment prices

2025-01-18 08:35:00, Ekonomi CNA

The main factors that will influence the price increase remain the increase in the cost of workers' salaries, the increase in the cost of construction materials, and the cost of the increase in the infrastructure impact tax.

The increase in apartment prices will not stop even in 2025. Builders expect to increase apartment sales prices again. Property prices are expected to increase in areas near the center, the Small Ring Road and the New Boulevard in Tirana.

The chairman of the Albanian Builders Association, Erjon Harizi, says that in the capital, the areas where prices will increase will be close to the center. “In some areas such as inside the Small Ring Road, the New Boulevard, the former Aviation Field, prices have a tendency to increase during 2025,” says Mr. Harizi.

According to builders, significant price increases are also expected in the New Boulevard area, due to the rapid infrastructural development that the area is experiencing. One of the developers of one of the residential centers in this area confirms that from January 2025 it will increase sales prices by 15% (from 1,700 euros per square meter the price will reach 2,000 euros per square meter).

For the President of the Builders' Association of Albania, the main factors that will influence the price hike remain the increase in costs from workers' salaries, the increase in the price of construction materials, and the cost from the increase in the infrastructure impact tax.

"Construction costs are expected to increase through 2025, with labor perhaps the main factor. The sector is also facing a labor shortage. Construction quality is also increasing, as builders use better quality materials."

"There is also an increase in costs from the increase in the obligation for the infrastructure impact tax and the housing tax that came after the change in reference prices," he claims.

Even the developers of residential centers in Tirana themselves list the increase in wages for the workshop, for construction materials, and taxes as the main factor in increasing costs.

"During 2024, daily payments for employees start from 5,000-6,000 and up to 7,500 lek per day (the highest rate is paid for iron reinforcement connectors). The level of payment is high. For 2025, it is expected to go up to 8,000 lek/day."

The cost is also high for construction materials. For example, for scaffolding rental, fees range from 19 to 22 euros per square meter.

"Since the fall of 2023, builders have been charged an additional 50 euros per square meter from the increase in the infrastructure impact tax. Due to higher costs, price increases are inevitable," claims one of the builders in Tirana.

In 2024, builders were also hit in costs by the increase in the infrastructure impact tax and housing tax liability.

The decision to increase reference prices from August 2023 had an immediate impact on construction activity, given that these prices serve as the main factor in determining the value of the infrastructure tax and the monetary value of the 3% contribution tax on social housing.

The infrastructure impact tax for Tirana is at the level of 8% and is calculated per square meter on reference prices, which since August last year increased from 5 to 76% for its 32 cadastral zones.

Demand for apartment purchases is expected to remain the same as in 2024

Despite the fact that the capital continues to experience a construction boom, according to market operators, the demand for purchases in 2024 marked a decline. The main reason for the decline in demand was the high increase in prices and emigration, mainly of young people. But builders do not expect an increase in demand during 2025.

"In Tirana, the market is constant in new construction, perhaps resale has some stagnation, as a result of the very high tax, 15% of the profit tax, as the reference prices have a large difference compared to 2018," underlines Erjon Harizi, president of the Builders' Association.

In July 2023, the decision to increase reference prices for 32 cadastral zones of Tirana was published in the Official Gazette. The price increase for the cadastral zones of Tirana was from 5 to 76% and began to be implemented in August 2023.

After the increase in reference prices for the 32 cadastral areas of Tirana on which the building tax is calculated, their values ??also increased for the 5 administrative units of Tirana, such as: Dajt, Farkë, Kashar, Petrelë and Prezë. For these areas, the fiscal prices on which the building tax is calculated increased from 29 to 73%.

With the changes in the July decision, the reference prices remained unchanged in the districts. The increase in reference prices increased the obligations of citizens and businesses for the building tax, which is calculated on these prices.

Ylli Sula, the head of “Çelësi Media Group”, says that the demand for purchases in 2025 is expected to follow the downward trend of the previous year. Mr. Sula says that the decline will not be reflected in the real demand of families for housing, as it has almost been completed over the years and high sales prices are further increasing the tendency to solve the housing issue through long-term rental.

But according to him, what is expected to decrease is informal demand for purchases, due to the publication of conversations on EncroChat of people with criminal activity.

"In Tirana, the construction supply continues to be oversaturated, where the rates of granting building permits are high, although we also have greater emigration of young people. Therefore, the volume of the increase in granting permits for new construction remains outside the logic of the demand of citizens for residential purposes or even of businesses for office and shop premises.

The trend of real demand for housing is not increasing and is expected to expand even in 2025, as prices are unaffordable for young families. The wealthy have exhausted the demand for housing. Demand for retail or office properties has also fallen from businesses, due to high prices.

In 2025, there are expected to be changes in the demand for property purchases with undeclared money. I predict that the demand from this category will decrease, as after the Sky and EncroChat wiretaps among criminal groups and the investigations launched against them by SPAK, this category will certainly step up to buy high-priced properties in Tirana.

"Also, the investigations launched by SPAK into political and business figures will continue to affect the demand for purchases with undeclared money," says Mr. Sula.

PREDICTION

"In 2025, there are expected to be changes in the demand for property purchases with undeclared money. I predict that the demand from this category will decrease, because after the Sky and EncroChat wiretaps among criminal groups and the investigations launched against them by SPAK, this category will certainly step up to buy high-priced properties in Tirana. Also, the investigations launched by SPAK against political and business figures will continue to affect the demand for purchases with undeclared money," says Mr. Ylli Sula of "Çelësi".

EncroChat is a European-based communications network and service provider used primarily by members of organized crime, including Albanian criminal activity. The platform was discovered by Europol during an operation conducted in 2020-2021. The service was found to have around 60,000 underworld subscribers, including Albanian citizens, who were sending encrypted messages.

Demand for purchases slowed down again in 2024. Builders claimed that sales were lower than in 2023. But despite fluctuations in demand, price increases were not curbed.

In December 2024, in the “Paris Commune” area, sales offices for new units report record prices for the area. Contacted by “Monitor”, the sales office for one of the new facilities being developed in the area (near the Civil Aviation Institution) says that the sales price is 3,500 euros per square meter. Compared to 2023, when the maximum price was from 2,600 to 2,800 euros per square meter, the increase is 25 to 35%.

Also, by July, apartment prices in some central areas increased by 10 to 16%, compared to July 2023, according to data from real estate agencies.

Specifically, in some areas, such as the one near the "Selman Stërmasi" stadium, the maximum price reached 2,900 euros per square meter from 2,600 euros per square meter in 2023. The increase was 16%.

Near the “Olympic” park in Tirana, in one of the new complexes being built, in July 2024, sales prices reached from 2,200 euros minimum value to 2,900 euros maximum value per square meter. In this area, sales prices in 2023 started from 2,300 to 2,600 euros per square meter.

The increase was 10%. Within the Tirana Ring Road, apartment sales prices are over 2,300 euros per square meter.

There has also been a price increase in suburban areas. According to real estate agents, the price increase has been influenced by increased demand, as young families cannot afford to buy a house in central areas.

In "Kombinat", apartment prices in July reached 1,200 to 1,300 euros per square meter, up from 1,100 last year. The increase is between 9 and 18%.

In the “Astir” area, prices fluctuated between 1,200 and 1,300 euros per square meter in the first lines of construction, up from 1,250 euros last year. In this area, prices have increased by 4%.

In the "Fresku" area, apartment sales prices from 900-1,000 euros per square meter have reached 1,100 euros per square meter.

The increase is about 11%. In Paskuqan, from 850-900 euros per square meter, prices have reached 1,050 euros per square meter, due to high demand according to real estate agents.

Building permits on the rise

The Builders Association predicts positive construction activity for 2025, as many development permits granted in 2024 will begin implementation this year.

"For 2025, the performance of the construction sector will continue at the same pace as in 2024, perhaps even better, as many construction permits in Tirana and the coast have not yet started work," claims Erjon Harizi.

For the period January-September 2024, the area granted for construction permits in the capital has reached a new historic level, surpassing the 2022 level, which held the record until now.

According to INSTAT, for the first 9 months of this year, a total of 1.58 million square meters of building permits were issued, an increase of 60% compared to the same period a year ago. Even compared to 2022, which until now marked a record, the area of ??permits is 8% higher.

The largest number of permits were granted in the second and third quarters, with 666 and 684 thousand square meters, respectively. For example, in the third quarter, permits were granted that were 70% of the entire area of ??2023.

Real estate agencies expect increased demand in the suburbs and coast

According to some real estate agencies, the past year has seen a decline in demand for apartments. Demand has shrunk more for expensive properties, mainly those priced above 1,500 euros per square meter and located close to the center.

In addition to expensive prices, given that most residential properties are purchased with bank financing, real estate market agents assessed that the increase in interest rates was also negatively reflected in the demand trend.

For other real estate agencies, demand during 2024 was on the rise, a trend that will continue during 2025.

Dritan Leka, from the real estate agency CPM, predicts that the demand for property purchases will increase during 2025, following the positive trend of recent years, including last year. Overall, in 2024, the increase in demand was influenced by the suburban and coastal areas.

"The demand for apartments has been increasing year after year. It was also increasing in 2024."

Even the fact that the construction of high-rise buildings or residential complexes continues all the time in Tirana shows that there is a positive trend in demand.

The area with the highest demand potential was Paskuqan. During 2024, we found that the infrastructural development of the Paskuqan area brought a significant increase in demand, both from locals and foreigners.

In addition, there was an increase in purchases in coastal areas, thanks to new infrastructure developments for tourism. I predict that the demand trend will continue to increase for 2025, especially in coastal areas, whose infrastructure will continue to develop, including the construction of Vlora Airport. As a result, there will continue to be even more foreign buyers.

Jonian Antoni, CEO of "Century 21 Albania", says that the two main property sales markets, Tirana and the coastal areas, will continue to remain the most sought-after.

"We have seen significant demand in 2024, which has been almost the same as the previous year. We do not expect major movements for 2025 either. As we have said before, given that bank interest rates have increased in the second half of 2022 and early 2023, the market in 2023-2024, and also in 2025, is not expected to increase.

"Fortunately, there was no market contraction during 2024, as a result of high bank interest rates. We hope that the market will continue at the same pace in 2025," he stressed.

During 2024, the main category of property buyers in Tirana were local Albanian citizens and the diaspora. Dritan Leka, from CPM, predicts that overall, for 2025 as well, demand will be dominated by Albanian citizens.

"Most of the buyers are Albanians, including young families investing for housing, others for expanding their living environment, as well as the category of those investing for resale. For investment purposes, through renting out, more properties are being purchased by Albanians living abroad. They mainly prefer good areas near the center, with higher prices than suburban areas."

Even according to Mr. Jonian Antoni, in 2025, demand in Tirana will be dominated by locals, while in coastal areas it will continue to be higher by foreigners.

"Whenever we talk about the country, demand is dominated by the domestic market with a ratio of 70-80% locals and 20-30% foreign buyers. If we were to talk about specific areas, this proportion changes a lot."

In coastal areas, 50-60% of demand is made up of the foreign buyer market and 40-50% by local buyers. Of course, the opposite is true in Tirana, where over 90% are local buyers and only 10% are foreign buyers.

For the 12 years that we have been present in this industry, Tirana buyers are over 90% local buyers. However, this is a discussion that contains debate on how to classify diaspora buyers, who have two passports (Albanian and foreign).

In 2025, real estate agencies do not expect any change in property sales prices, both in the capital and in coastal areas.

"Analyzing what happened in 2023-2024, we do not expect major price changes. We think that in some cities, or sub-areas of cities, prices may be reset, as a result of infrastructure developments or overpopulation of areas."

"Having a +/- 5% difference, we think that prices will stabilize in 2025. But the overall price will remain, the real estate market continues to be strong and the demand for purchases, both from locals and foreign buyers, is at high levels," he asserts.

While Dritan Leka, from the real estate agency CPM, links the expected price change to the phases of development of residential buildings. “The phenomenon of price increases is more present at the moment of the first phase of construction, both in Tirana and on the coast.

"In the initial phase of the construction of the facility, it starts with market prices. This is the phase that has the most buyers. Later, during the development of the construction facility, prices change," he says.

The law on the revaluation of real estate with a reduced tax rate from the current 15% is expected to come into effect next year. The Minister of Finance and Economy, Petrit Malaj, previously stated that the initiative to increase reference prices for other municipalities, with the exception of Tirana, will be discussed for approval after March 2025.

Real estate agencies have been most requested to implement this initiative, as due to high taxation, there has been a decline in sales of existing properties.

"This law will help many owners who will seek to sell their properties for investment purposes or the category of those who resell their property for reasons of expanding the living area or seeking to change the location of their residence."

Consequently, the adoption of this draft law will assist these owners in easing the fiscal burden from carrying out purchase and sale transactions.

The head of the real estate agency, "Century 21 Albania", Jonian Antoni, does not anticipate that the amnesty for revaluation will bring changes in the increase in sales transactions./ Monitor Magazine