Construction sector has seen strong growth in recent years, after the cyclical decline that started in 2008, reaching a new record in 2021. 

According to INSTAT data, processed by Monitor, the Gross Domestic Product (GDP) of the construction sector, measured at current prices, which evaluates the economic transactions of the sector[1] reached 180 billion ALL (1.5 billion euros) in the year 2021, marking a historic record level (see chart: GDP at current prices, Construction, 1996-2021). 

Following transition changes, from the beginning of the 90s, most of the free capital in the country went to build apartments and private housing. Rapid demographic developments and the displacement of the population from rural to urban areas fueled this trend, which culminated in the upward cycle until 2008. 

After this period, this sector entered a cycle of maturation and decline, reflecting the saturation of the market and the orientation of businesses towards other sectors. In 2013, construction reached its lowest level since 2005. 

But after 2013, construction returned to growth, driven by both infrastructure projects and the return of momentum in residential projects, especially in the capital, to reach a new record in 2021. 

This trend is expected to continue, based on the area of ??construction permits in 2021 and the first 6 months of 2022. According to INSTAT, in 2021, the area granted for construction permits in the capital was 1.6 million square meters, a record level at least since 2010 when the data is reported, of which almost 80% were for residential construction. 

Yes, according to INSTAT, only in the first 6 months of 2022, almost 1.2 million m2 of construction permit area was granted in the capital, or as much as 75% of the area granted for the entire year 2022 (see the chart: Area of ??construction permits granted in Tirana, 6 M I). 

Even the real estate sector has accelerated growth rates starting from 2018. According to INSTAT, GDP at current prices in real estate activity reached 112 billion ALL (almost 1 billion euros) in 2021, reaching the highest historical level after the transition (see graph: GDP at current prices Real Estate Activities ). 

A few days ago, the International Monetary Fund (IMF), in the last statement for Albania, advised to be careful about the impact that the momentum of construction and the expansion of the real estate market could have on the stability of the financial sector. 

"We call for close monitoring and management of potential risks from high credit growth over recent years, including increased lending in foreign currency. 

In this context, we welcome the efforts of BSH to address the significant lack of data on the real estate market and construction, as well as call for increased supervision of the impact of this sector on financial stability," the official statement says. 

[1] GDP at current prices - INSTAT: "All economic transactions are the result of the calculation of different quantities of products and prices of production and sale. By collecting all the specified transactions, the total value for a specified period is obtained. When the values ??of the two periods are compared, they will simultaneously be reflected in both price and quantity. These values ??are expressed in current prices". 

(Source: Monitor)