Albania is the property market’s latest darling. It has miles and miles of beautiful and pristine coasts along the Adriatic Sea. Tirana, the capital, is in the midst of a construction boom with the airport set for a major upgrading.Times Online calls it “Europe’s last frontier.” Thisismoney.com points to Albania as one of 2008’s property hotspots. Colliers confidently predicts a housing boom. Themovechannel.com cites Albania as the second hottest investment destination in Europe.
Since no official house price figures exist, market players and speculators alike make different estimates of how much house prices have risen and will likely rise in the future.
Property prices have risen 200% in the most sought-after places, with an overall increase of 20% annually, according to Obelisk, a leading European real estate firm.
Prices are expected to go up by 10 to 15% annually, “perhaps even rising to 30 percent when Albania enters the EU,” says David Stanley Redfern, Ltd., an overseas property specialist.
Some reports say that prices of city-centre apartments have quadrupled over the past six years.
There are no restrictions on the purchase of private residential property by foreigners, except for agricultural land.
Cheapest in Europe, but yields are low
Property prices in Albania are among the lowest in Europe, although real estate agent’s estimates vary. Vacant land can be bought for as low as €40 – €150. Prices of newly built apartments in Tirana are around €500 to €800 per sq. m.. Luxurious units in the city centre are priced at around €1,000 per sq. m.Rental yields estimates are quite low, at around 5% to 7% per annum. Property buyers are counting more on capital appreciation than on rental income for a return on their investment.
TAXES AND COSTS
Income tax is moderate in Albania
Rental Income: Rental income is taxed at a flat rate of 10%, withheld by the tenant.Capital Gains: Capital gains realized from the sale of Albanian properties are taxed at 10%.
Inheritance: There is no inheritance tax in Albania.
Residents: Residents are on their worldwide income.
Buying costs are low, but risks are high
Roundtrip transaction costs are low, at around 5.83% to 6.85% of the property value. The bulk of the cost is transfer tax levied at 2%, which is payable by the seller. Real estate agent’s fee is payable by the buyer at 1% and the seller at 2%.The government is still in the process of returning properties to their pre-Communist period owners. Buyers should be wary of fake title deeds and properties with multiple owners. Several buildings and new constructions lack appropriate building permits.
LANDLORD AND TENANT
Undeveloped rental market
The rental market caters mainly to expatriates, exchange students, diplomats and aid workers. Due to the privatization of public housing after the fall of Communism, Albania is a country of homeowners.
Huge potential for Albania
The Republic of Albania is still struggling emerge from the shadows left by its communist past. The Democratic Party led by President Sali Berisha took over after the defeat of the Communist Party in 1992. Reforms were gradually adopted but corruption and pyramid schemes brought the economy and the government down in 1997.With anarchy on the streets, the Socialists and its allies won the elections in 1997 and held power until 2005. However, the government was plagued by in-fighting, corruption, protests and allegations of election irregularities.
The current administration led by comeback kid Berisha, now Prime Minister, vows to work on the integration of Albania into Nato and EU.
Albania is one of the poorest countries in Europe with a GDP per capita of US$3,350 in 2007, and unemployment at 30%. The economy expanded by an average of 7.3% annually between 1998 and 2005. Real GDP growth was 5% in 2006 and 6% in 2007. The economy is supported largely by remittances from Albanians working in Greece and Italy.
The government has already had some success with market reforms, and average inflation from 2003 to 2006 was held at 2.5%. Inflation in 2007 was 2.9%.
However there are plenty of problems, including corruption, lack of transparency, substandard transportation and infrastructure, an inadequate electricity supply and a thriving (and very successful) informal market.
The country has reserves of oil, gas, coal, iron as well as hydroelectric potential all still largely unexploited. Blackouts are common and most establishments have their own stand-by generators.