Loan conditions have changed in Albanian banks
Commercial Albanian banks have revised the conditions for granting loans, including housing loans. Since the beginning of 2023, the rules of loan processing have changed. They have become more conservative. Experts believe that the tightening of lending policies could have a negative impact on the real estate market.
The changes have affected not only individuals but also legal entities. The reason for the tightening of conditions was the increase in interest rates and inflation. The latter significantly worsened the solvency of citizens, which increased the risks for banks.
According to the Central Bank, in 2023, commercial financial institutions did not change the rules for issuing mortgages. However, competition between them was growing rapidly. At the same time, analysts noted an increase in cases of rejection of loan applications. The main reasons for this were:
– insufficient financial security of the borrower;
– doubtful credit history;
– instability of employment.
In 2023, there was an increase in demand for various loans. Loans for liquidity and investments were the most popular. In addition, bank customers applied for loans to buy a house or an apartment. The purchase of consumer goods was also a common reason for borrowing.
How the credit sector is developing
The Bank of Albania recorded increased lending to the real estate sector in 2023. The country’s financial institutions granted loans worth almost 247 billion lek during the period, which is about 19 billion lek more than in 2022. Most of the applications came from representatives of the wholesale and retail trade sector and the real estate market.
Despite the increase in lending rates, Albanian businesses and citizens are actively applying for loans.
Mortgage lending grew by 78% in 2023. This sector accounted for more than 8 billion lek in total, while in 2022, this amount was 1.7 billion lek. The reason for this activity, according to experts, is that investors are interested in the local real estate market. Many see the purchase of real estate as a profitable investment. At the same time, the cost of property is rising, forcing buyers to turn to banks.
Forecast for the housing market
Experts expect house prices to continue to rise this year. The main reason for the increase in value is the increase in the Infrastructure Impact Tax. Revising this tax has led to a rise in the cost of construction work and, as a result, of properties in general. The new level of tax is only approved in the capital of Albania. Here it has reached the maximum level of 8%. However, the resort’s municipal authorities are considering possibly increasing the rate from 4% to 6%.
Another factor contributing to the increase in property costs could be the revision of prices in the real estate market. So far, this process has only affected Tirana.
