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IMF expresses concern: A bubble is being created in real estate

2022-12-12 07:50:49Biznes SHKRUAR NGA REDAKSIA VOX

IMF expresses concern: A bubble is being created in real estate

As never before, the latest report of the Monetary Fund for Albania (IMF) has paid high attention to the construction and real estate market, warning of the risks that there may be a downward turn in the price trend and the implications for the financial sector. and banking.

The developments in the real estate market, the increase in prices, the increase in interest, the increase in lending to this sector by banks and the entry of foreign flows are mentioned several times in the report.

The IMF points out that the economy is sensitive to a change in real estate price growth, given the growing contribution of the sector to the economy and the growing exposure of banks.

The IMF Board of Directors emphasized the importance of increased vigilance towards financial stability by policymakers, given the rapid growth of credit and real estate activities.

"Supervisory will need to monitor the growth of bank lending, especially foreign currency lending, and real estate-related activities, and take action as necessary to curb any excessive risk," the IMF report said.

The IMF recommends addressing significant data gaps for real estate and construction and ensuring enhanced oversight of the sector's impact on financial stability. The sector is becoming an important channel for macro-financial linkages, given its growing contribution to economic activities and increased bank financing and foreign flows. BoH surveys also show a rapid rise in real estate prices, the IMF says.

Despite the recent efforts of BH, significant data gaps still hinder monitoring and timely identification of potential risks. "The lack of reliable data prevents BSH from properly monitoring the rapid growth in the real estate market and developing relevant macroprudential policies", the IMF points out.

The IMF emphasizes that Albania must accelerate its efforts to get off the money laundering gray list, where it has been placed by the FATF (the European Commission's anti-money laundering mechanism) and continue to reaffirm its commitment to a strong anti-money laundering framework. money laundering and terrorist financing. One of the recommendations is to increase efforts to conduct risk-based inspections of professional and non-financial business entities – including construction companies and real estate agents.

The IMF graphs (see figure 9 at the bottom) show the increase in the contribution of construction to the economy in recent years, the significant increase in lending for construction and real estate from 2019, although interest rates are becoming more expensive. Also, the price trend is increasing rapidly.

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