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The ratio of non-performing loans for the purchase of properties increased last year

2024-05-06 11:07:00, Ekonomi CNA

The ratio of non-performing loans for the purchase of properties increased last

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The ratio of non-performing loans in loans for the purchase of real estate by individuals increased in the second half of last year.

According to data from the Bank of Albania, the ratio of non-performing loans for this product at the end of 2023 increased to 3.2%, from about 2% in the middle of the year and 2.3% a year ago.

The loan for the purchase of real estate, mainly housing, by individuals still remains among the products with the best quality performance for the banking sector.

However, the increase in the ratio of non-performing loans may be a signal of caution, given the rather high lending rates in this market segment over the past few years.

The home loan increased for the fourth year in a row in 2023. Bank of Albania data showed that the new home purchase loan reached a new historical record of 48.5 billion alleks or about 466 million euros. New housing loans increased by 5.2% compared to 2022.

The value of the active portfolio or home loan surplus at the end of 2023 reached almost ALL 181 billion, with an annual increase of 8.4%.

Since the end of 2019, the loan portfolio for the purchase of real estate by individuals has increased by 55%.

Low interest rates have made home loans attractive to borrowers, while at the same time the cycle of rising real estate prices in recent years has also increased the demand for home loans from families, increasing the perception that buying a property is a good investment for the future.

The increase in prices has influenced larger values ??of loans taken by individuals to buy apartments, contributing significantly to the increase in the overall volumes of this product.

However, developments in the real estate market and bank loans for properties have been assessed with concern by the International Monetary Fund (IMF). In the last statement for Albania, in January of this year, the IMF suggested to the Bank of Albania the establishment of a countercyclical capital increase for the banking sector.

According to the IMF, the imposition of a countercyclical addition to the capital adequacy ratio for commercial banks may be considered in the medium term, to further strengthen financial stability.

The annual increase in bank credit, the annual change in bank credit for real estate, the annual change in the housing price index and the annual change in the housing price index to the rental value are summarized by the Bank of Albania in the Early Warning Indicator index (TPHP).

At the end of the fourth quarter 2023, the value of the TPHP index was 0.54, increasing from the value of the preceding quarter (0.51) and slightly above the comparative threshold value of the historical average (0.5).

The suggestions for the application of a countercyclical rate by the IMF are based precisely on the early warning indicators and mainly on the developments in the real estate market and the credit given by the banks to finance their purchase.

However, in the last decision-making, the Bank of Albania did not consider such a measure necessary. In the decision dated April 2, 2024, the Governor, Gent Sejko, decided that the countercyclical capital addition will continue to remain at the zero level.

The application of a countercyclical capital supplement is provided for in the 2018 regulation "On macroprudential capital supplements. Such an addition is aimed at slowing down lending, in case the central bank estimates that it is growing at too fast a pace./Monitor