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Paradox: Builders expect record price increases, but citizens do not have money to buy apartments

2022-07-08 17:55:18Biznes SHKRUAR NGA REDAKSIA VOX
Paradox: Builders expect record price increases, but citizens do not have money
Tirana

The domestic economy is facing a paradox in recent years.

While it is being built at high rates, which is clearly helping economic growth, consumers, who are facing high prices in their daily lives, are in a completely opposite trend: They claim that they have neither the opportunity nor the plans to make large purchases, such as an apartment, or its renovation.

Builders, on the other hand, are optimistic about the expansion of their activity and warn of another increase in apartment prices.

According to the business confidence survey published by the Bank of Albania, which interviewed builders, the latter have maximum expectations for price increases. The balance of responses to the question "Prices over the next 3 months" is nearly 50 for June (50% more builders think prices will rise than those who think otherwise), with significant increases over June and close maximum levels in March.

According to the Bank of Albania, the confidence indicator in construction (TBN) experienced an increase of 7.3 percentage points in June, reaching its historical maximum. Both components of this indicator experienced growth, but the increase in the balance of construction activity was more significant than that of actual orders.

Other INSTAT data also warn that construction will continue at a high rate. While the year 2021 marked the record of the area of ​​construction permits issued in the capital, since the 90s, the year 2022 should bring another record, signaling further concrete in the already overburdened Tirana. INSTAT reported that the area of ​​construction permits granted in the capital was 800,000 square meters, doubling compared to the same period a year ago. The area of ​​permits granted in the capital only in the first quarter of this year is half of the permits granted for the entire year 2021.

But who is buying? In contrast to the momentum of concrete, consumers, who are buyers of builders, express skepticism about their ability to pay. For the question "Do you plan to buy or build a house in the next 12 months (for yourself, a family member to live in, as a holiday home, to rent out, etc.)?", the balance of responses is -86 (that is, 86% fewer individuals have the opportunity to buy a house compared to those who have), for the first quarter of the year. The balance of negative responses for large purchases is -70 for June, near historical highs. Regarding the expectations for large purchases in the future, the indicator remains negative, at 51.4.

After an improvement in May, consumer confidence deteriorated again in June, according to the index. According to the Bank of Albania, the Consumer Confidence Index (CPI) decreased by 0.7 percentage points in June. This decline has caused TBK to curb the improvement trend started in the past two months, remaining significantly below its historical average. The decline was influenced by more pessimistic expectations for the economic situation in the country, as well as more pessimistic estimates for purchases in large amounts, current and expected. Meanwhile, expectations for the financial situation in the future improved somewhat compared to a month ago. Expectations for consumer prices in the future have also increased this month.

In May, inflation reached the level of 6.7%, the highest in more than 20 years. Meanwhile, the inflation of food products reached 11.4%. The price of oil recorded an annual increase of 29%, the price of bread by 19% and of dairy products by 18%.

Economic growth led by construction is not improving welfare

The construction sector recorded the highest growth rate of gross production in the first quarter of this year. According to INSTAT figures, the production of the construction sector increased by 25.49% compared to the same period of the previous year. This was the second-highest quarterly increase in at least seven years.

Construction and real estate together made a positive contribution of +3.5 percentage points (1.99 and 1.55% respectively) to the strong performance of almost 6% of the economy in the first quarter of the year, contributing to almost 60% of the growth of the economy in the first three months of the year.

But the data of the Business and Consumer Survey show that this growth, which came mostly from construction and real estate, has not contributed to the improvement of the well-being of individuals, as they complain of a worsening financial situation, as a result of prices high. /Monitor


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