Energy and real estate are the sectors most invested in by foreigners in the first half of the year, according to data from the Bank of Albania, but interest in Albanian real estate has its downsides as well.
Overall, foreign direct investments in the first half of the year reached some EUR 634 million, the highest amount ever for this period and a 35% overall increase H2 in 2021.
Within this, some EUR 103 million was invested into the local energy sector by foreigners, an increase of more than 145% on the same period during the previous year. This continues a long-established trend, mainly due to the big investment in the TAP gas pipepline but also due to various hydropower projects.
The Bank states that many of these investments are renewables such as wind and solar.
During the second quarter of 2022, foreign investment in real estate reached a record high of EUR 83 million, an increase of 66% compared to the same period in 2021. During the previous year, foreign real estate purchases accounted for just 21% of real estate transactions, but in the last year, this has grown significantly, particularly in coastal areas.
While this is good news for the economy, there are fears it will contribute to increased rental and purchase prices, leading to locals finding it harder to buy or rent properties in areas they want to live. Many foreigners choose to buy in Albania because the prices are lower than many other places in Europe, and it is slowly becoming a sought-after tourist destination.
In addition to increased prices in already-built properties, the cost of new apartments under construction is rising sharply. New flats in Tirana are currently running 40% higher in price than in 2021.
This has been influenced by several factors, including increased building costs such as steel, cement, and other metals, and expectations over the forthcoming fiscal amnesty. The proposed law would allow Albanians and foreign citizens to deposit up to €2 million in a local bank without questions, legal immunity, and a tax of between 5-10% payable. The EU and IMF condemned a previous version of the draft last year, while the Commission has also criticised the current version for putting Albania and member states at risk of financial crime.
CEO of Celesi media group, Ylli Sula told Monitor that many developers expect the amnesty to be approved, alowing them a way to invest informal funds.
“The prices of the apartments are high as the builders have expectations for the effects that the fiscal amnesty will have. Those who have informal money will rush to invest it. Since the interest on deposits is low, while in real estate the profit rates are higher, the money that is expected to be formalised will be invested for the purchase of apartments,” he said.
Prices in the capital are reaching EUR 5000 per square metre in some central areas, while it is becoming increasingly hard to find any property under EUR 1000 per square metre.
