The number of building permits issued in Albania increased by almost 50% in 2021, when compared with the previous year, according to INSTAT.
Some 1396 permits were issued throughout the whole country, equivalent to almost four a day. In addition, the value of approved contracts increased by around 30% to EUR 819 million.
In the last quarter of the year, permits rose by 16.3% bringing the total increase to 45.3% over the whole 12 months.
The total area approved was over 2.3 million square metres, up from 1.6 million square metres in 2020.
Residential buildings make up the bulk of the permits issued, with most in Tirana, followed by Elbasan and Durres.
Rental prices in the capital have increased significantly, pricing many locals out of the market. Whereas four years ago, a two-bedroom apartment in a relatively central area would rent for around 300 euros a month, today it would cost more than 500 euros.
The same issue plagues homeownership. For a new-build in the city center, prices are around 4000 euros per square meter, falling to 800 euros in the far outskirts. The average of 1102 euros is extremely high when considering the average monthly salary of around 500 euros in the capital. Tirana is now one of the most expensive places in Europe to buy real estate, and rental costs are starting to resemble Brussels and Rome.
The Bank of Albania announced that housing in the capital has increased by 43% since 2014, and prices keep going up, while salaries remain stagnant and foreign investment remains cautious.
Experts say that Albania is at risk of an economic crash once the construction bubble bursts, and house prices could fall by 50% in the coming years.
Fears over money laundering
It’s estimated that up to 700 million euros in illicit funds enter Albania every year. This is channeled into the country through predominantly criminal activity, corruption, and tax fraud. Over the last three years, it’s estimated that some 1.6 billion euros has been laundered into Albania’s construction sector.
In 2020, the Global Initiative against Transnational Organized Crime (GITOC) noted that the new residential or commercial constructions in Albania were a popular way to launder money.
“It begins with the financing of new residential or commercial construction, continues with financing the construction contracts and undercounting the value of labor in construction, and again with the sale of the finished buildings.”
It noted that Municipalities often issue construction permits but do not monitor what happens thereafter. In Albania, construction since the fall of communism has been stimulated by people from the Albanian diaspora who invest in the country with funds where it’s impossible to ascertain the source of legitimacy.
The report found that out of 141 companies given building permits for high-rises between 2017 and 2019, 59% did not have the financial capacities to complete them. The balance sheets of the companies in question revealed that they had minimal revenue and no assets or loans that could be used to fund the projects.
GITOC estimated that 60% of the value of projects were derived from illicit money. The report also claims that even when you factor in the value of mortgages, there is a discrepancy of some 600 million euros in 2019 alone. Findings from the report and an unnamed Albanian money-laundering expert stated that up to 1.6 billion euros of “dirty money” could have been laundered through the Albanian real-estate sector between 2016 and 2019.
Read More: Tirana – A City Scarred by Money Laundering
