1. REAL ESTATE MARKET, IT’S
ASSESSMENT AND THE
FACTORS THAT AFFECTS IT
STUDENT : OLA KATROCI
SCIENTIFIC LEADER: ALDA NIKAJ
25/09/2015
1

2. OBJECTIVES
• To identify and examine the current state of
real estate market in Albania.
• To identify the issues related to this market.
• To explore the possible strategies which can
lead to the improvement of the situation in the
future.
• To study the factors that effect in real estate
market focusing in the apartments market,
developing this study also with an
econometric model.
The objectives of this project are
several:
2

3. INTRODUCTION
I. Real Estate market in Albania is a relatively new market dating back to the early
'90s. The last decade, the real estate market in Albania has started taking
development, although experts still assessed it as unorganized according to
international parameters. The construction sector remains the main partner in the
development of this sector, since it contributes 18% of GDP. On the other hand, this
sector is one of the main directions of lending by the banking system in Albania, as
40% of total loans, worth about 1 billion euros, in construction sector in Albania.
I. This project will examine some of the social, demographic, economic and political
factors that influence directly in real estate prices of apartments in Tirana. It will
examine whether there are differences between the reference price set by the
National Housing Authority and the prices that resulted from the study of “Ҫelsi”
newspaper for June, again referring to the city of Tirana. Another stated goal is to
create a model which explain to us the extent affect factors such as: GDP, the cost
of construction, employment and inflation in the price of an apartment in Albania.
3

4. CHAPTER 1: THE HISTORICAL OVERVIEW
ON INFORMALITY DIMENSIONS AND THE
REFORMS TO IMPROVE THE SITUATION
The collapse of the communist system in Albania, and the transition of the country was
accompanied by the development of a wide range of phenomena with a very complex
social and economic life, which was linked in particular to the system of ownership,
demographic concentration where 80% of the population lived in rural areas, control over
the territory etc.
This situation created, was becoming very complicated, bringing the deformation of the
urban development of cities, in the early 90s.
It is estimated that about $ 6-8 billion are invested in informal constructions in Albania,
40,000 hectares of land are occupied illegally or informally and about two-thirds of the
buildings in urban areas in Albania are informal developments.
Recently Albania has started to do considerable progress in environmental projects across
the country that gives us hope that the country is changing even though gaps in the
legislation of territorial planning and administrative failures in giving building permits have
made it difficult to obtain the relevant permit construction preventing the country's
competitiveness.
4

5. The process of legalization and
ALUIZNI
Legalization was a pragmatic response to the difficult implications of occupation
and settlement of land in massive and illegal way. The law on legalization of
illegal constructions provides the performance of legalization reform in three
main components:
1. Legalization
2. Urbanization
3. Integration
The legalization process aims to give the undisputed ownership, eventually
eliminating any legal or technical inaccuracies and making these properties part
of the market share.
5

6. ALUIZNI - legal instrument in order to
achieve the legalization
To manage the process of legalization it was established a professional
and centralized agency, (ALUIZNI). Also ALUIZNI makes ownership
researches, identifies informal properties, approves the boundaries, and
prepares technical and legal documentation which passes then for
approval by the government. About a third of illegal buildings are built on
land belonging to a third party. To resolve this issue, ALUIZNI propose
expropriation of land in private ownership to the government and once it
becomes state land, then the land is transferred to the applicant.
ALUIZNI has produced digitized maps of most of the properties for
which it has received applications for legalization.
6

7. Table 1
Districts Self-declaration 2004-2006 Percentage of total
Tirana 96.526 36
Durres 38.944 14
Vlora 25.348 9
Lezha 12.518 5
Shkodra 22.224 8
Elbasan 21.556 8
Berat 8.833 3
Fier 27.124 10
Gjirokastra 3.278 1
Korca 9.322 1
Dibra 2.365 1
Kukes 2.554 1
Totali 270.592 100
7

8. However, only a small part of the legalization completed the property titles registered by
ZRPP. Problems of coordination between ZRPP, ALUIZNI and AKKP have hampered the
process of legalization. First, there were issues in the standardization of data.
Geographical indications, are based on more accurate information than the ZRPP.
Table 2
Applications
Accepted
Prepared
Digitalized Maps
Privileged
applications
processed
submissions for
approval
in government
Real estate
registered by
ZRPP
270,592 113,490 90,464 54,104 4,504
8

9. Achievements of ALUIZNI
ALUIZNI was established as an
executive structure responsible
to manage the complex reform
that will take place in three
main directions: the
legalization, urbanization and
integration of areas / buildings
across the country. For the first
time in Albania it was
conducted a deeper and
realistic analysis in terms of
data quality. One of the
recipients of information out of
the files will be ZRPP. Results
System Computerized of
ALUIZNI those which legalized
ownership will be sent in the
form of looking at the database
of ZRPP.
In The future, the agency
plans to provide public
access to the data that can
be accessed without
restrictions. This will be an
area for further
development of the system
in the future.
9

10. ALUIZNI Problems
One of the main
problems that has
emerged this process is
offsetting the real land
owners on which were
built the majority of
buildings that are under
the process of
legalization.
Time is another factor
that this process has
disadvantages. During
the last years they are
given an average of
3,000 building permits
per year. If you do a
simple mathematical
calculation: 270,000 to
self-declaration, dividing
it by the number of
permits issued each
year reach a terrific
conclusion of 90 years
that this whole process
to be completed.
10

11. Advantages of registration system
• Mirror principle
• The second principle
• The principle of security
• The “open” principle
The basic
principles on
which the
registration
system is built
are:
11

12. Apart from this, process guarantees that there are many
advantages that it offers, some of which will be listed
below:
Encourage the development of complex
programs and projects of national, regional and
community.
Open the way and create facilities to carry out
the expropriation for new urban developments.
It creates opportunities to Albanian citizens who
are owners of a real estate to apply and receive
loans in the banking sector as a guarantee that
they legally possess assets.
Provides a reliable infrastructure for foreign investors
who are interested to open a new business in Albania
or develop an existing business. The issue of property
is one of the main inhibitors for attracting IHD in our
country
Stops and limits the possibility for abuses
occupying the property so other individuals or the
state having no rights over them. 12

13. Strategies for the future in the
process of legalization
We need to think of possible solutions to the status of a large number of properties that remain
illegal: such solutions should not include the expropriation of previous owners (claimants return) and
must be accompanied by credible measures to avoid the continuation of building illegally.
Evaluation of opportunities for relocation of people from informal areas that cannot be legalized
because environmental protection, cultural heritage, or security.
Providing reliable enforcement of existing laws to prevent illegal reoccupation of land and
construction.
Exploration of space left for the physical return.
Payment of compensation to expropriated owners.
Consideration of a mechanism through which a large part of the cost of compensation will come from
beneficiaries of expropriation
13

14. To ensure progress in the implementation of these policies, however the
government will have to provide clear guidance and supervision of all
processes related to the political level. This can be achieved in several ways,
including the following options:
Improve coordination
to ensure that all
agencies (IPRO,
ALUIZNI and PRCA)
to apply the same
technical standards
and requirements.
To improve the
accuracy of IPRO
register.
Consider
establishing a
cabinet member, who
will be responsible
for all agencies
involved in the case
related to the
property
Close monitoring of
the implementation
of the Law on Urban
Planning and
performance of
municipalities
14

15. CHAPTER II: ASSESSMENT OF REAL
PROPERTY AND BANKING SYSTEM
Mortgage as a bridge between the real estate and banking
system.
Civil Code of the Republic of Albania has this definition for mortgages: "Mortgage is
a real right to be on the property of the debtor or a third party, in favor of the creditor,
to ensure the fulfillment of an obligation."
When seeking mortgage loans for house purchase, the apartment, office, store,
customer can pledge land, houses, apartment buildings, which generally call real
estate. In terms of the law the owner is the person whose name is listed as the
owner of property. Ownership of a property estate confirmed by a document issued
by the Office of Registration of Immovable Property (IPRO), called "certificate of
ownership" or better known as "Title of Ownership".
15

16. Strategies where banks rely on
determining the value of a real
estate
The construction industry world is characterized by competition and
high risk compared with other industries. As a result pricing is one of
the most important aspects of marketing in a construction company. An
alternative strategy is based on market price .There are many different
models of the most prominent researchers consider this as a serious
strategy.
1. Strategy "price under budget“
2. The "price according to environmental constraints" strategy
3. Strategy of "working fast price“
4. “Guiding price“ strategy
16

17. Methods that determine prices in the
real estate market
Market Value
method
Method of
direct
comparison
Investment
Method
Profit Method
Development
Method
Cost Method
17

18. CHAPTER III: FACTORS AFFECTING THE VALUE OF
REAL ESTATE. THE COMPARISON OF MARKET VALUE
OF APARTMENTS WITH THE AMOUNT DEFINED BY
THE NATIONAL HOUSING AGENCY
(CASE: TIRANA).
Classification of real estate:
Residenti
al
propertie
s
Non-
residentia
l
propertie
s
Industrial
propertie
s
Hotels
and
motels
For
relaxation
and
entertainme
nt assets
Institution
al
propertie
s
18

19. Factors that cause the change in value
of the property
Demand and
supply
Total
population
Civil status of
population
The average
age of
population
Technological
changes
Offer cash
Geographical
location of
the property
19

20. Factors affecting the real estate market
The economic situation and the country's finances.
Expected economic trends also influence the real estate market.
Government policies
The local economy.
Geographical factor.
Other factors such as: fashion, individual characteristics, the condition
of repairs, services offered etc.
20

21. Prices of apartments and land - the
case of Tirana
Demand for purchase of apartments last two years was reduced by 60%. This
is due to the effect of the crisis and at the same time the effect that prices have
remained almost unchanged. However recent data to the Statistics institution
indicate an improvement of the situation in the last quarter of 2013. This sector
grew by 3.7% gross.
21

22. Prices of sale of the land and
apartments according to Tirana
Once we determine the areas in which will examine the real estate market in
Tirana, we need to know the prices. Below there are listed the prices per
square meter of apartments and plots by zones defined on the map above.
22

23. Prices per square meter for June 2015
0
50000
100000
150000
200000
250000
300000
Qendwr
Kinema"Agimi"
Selvia
IshBlloku
MyslymShyri
KomunaeParisit
TiranaeRe
ZonaeLiqenit
ParkuIautobuzave
Rruga"AliDemi"
DonBosko
Selitw
Kombinat
Fushaeaviacionit
Kinostudio
Prices/m2
23

24. REAL PRICES DETERMINED BY THE
HOUSING AUTHORITY
0
50000
100000
150000
200000
250000
300000
Qendwr
Kinema"Agimi"
Selvia
IshBlloku
MyslymShyri
KomunaeParisit
TiranaeRe
ZonaeLiqenit
ParkuIautobuzave
Rruga"AliDemi"
DonBosko
Selitw
Kombinat
Fushaeaviacionit
Kinostudio
24

25. CHAPTER IV: THE IMPACT OF FACTORS
SUCH AS GDP, EMPLOYMENT, INFLATION
AND CONSTRUCTION IN COSTS OF REAL
ESTATE IN ALBANIA?
As a result of the privatization process that began in 1991, the real estate
market in Albania suffered within a short time changes. Within two years of the
privatization process mainly apartments, was completed and in 1994 the
construction of new apartments was launched significantly.
From 1996 to 2006 the price of houses increased by 190%. This at first glance
seem unreasonable, however, we can say that is simply a reflection of the high
demand. As long as the demand increases this percentage continue also
expected to grow even more.
25

26. The increase of price of real estate as a
percentage.
26

27. Employment and real estate
Employment is the main factor when it comes to long-term investments such as
real estate. Psychologically a high unemployment rate negatively affects the
individual's expectations for the future, as a result of investments that require
significant amounts of money can be postponed or canceled.
When unemployment rises, demand will be reduced for those products or
industries where these unemployed people spend more.
 Unemployment rate from 2000 to 2013
27

28. GDP and Real Estate.
Forecasts in the trend of prices of PPL can be used as a significant
indicator of development itself that GDP will be in the future. Earlier we
saw that has been an increase in the price of real estate in the years
1996- 2011. To make a parallel between these two elements we need
the data of GDP over the years.
28

29. Inflation and real estate
There is a positive correlation between the rate of inflation and real estate
prices. While the inflation rate increases, the same fate suffered the cost of new
construction. We can also say that in the moments when the pace of new
construction decreases, the offer decreases too and consequently we will have
an increase in prices.
 Inflation from 2003 to 2012
29

30. Econometric Model
To test the results that we learned from the above analysis graphical we
will build an econometric model where the dependent variable will take
the prices of apartments within Tirana and as independent variables to
consider, inflation, cost of construction, GDP and employment.
P= C + a1I + a2CND + a3GDP + a4PU, where Formula
 P- real estate price
 C- free term
 CND- Construction cost
 GDP- gross domestic product per capita
 PU- employment (calculated as 100% - the rate of unemployment)
The data taken into consideration include the years 2002-2011 and are
on an annual basis. Using the program Eviews 7 result to the following
equation:
 P= -58.17 + 9.09I + 14.69CND + 2.29GDP + 3.36PU Formula
30

31. To say that this model is important and valuable
for our research in advance should pass
several tests:
1. Test of autocorrelation
2. Test heteroskedasticity
3. Have at least two important independent variables.
4. A percentage of the explanation at least 60%
5. The relationship between the variables under consideration to be
important.
31

32. CONCLUSION
I. Real estate constitutes one of the most valuable assets for each country and for
each individual. Albanian real estate market is quite young and has its origins in
the early 90's. In the last decade the real estate market in Albania has started
taking development, although experts still unorganized assessed according to
international parameters.
II. To manage the process of legalization was created ALUIZNI a professional
agency, which supported the final allocation of informality Construction Albania.
III. This process had its achievements and failures. For the first time in Albania, it
realized a deeper analysis and realistic in terms of data quality.
IV. During this work it is well researched strategy that can be pursued in the future
so that this reform to not remain simply an attempt. That would be good for the
contenders for legalization cannot clear up the ownership right, if the owners of
expropriated are not offset.
V. To have progress in implementing these policies, the government will need
however to provide clear guidance and supervision of all processes related to
the political level.
VI. In a study conducted for the city of Tirana, where they are first examined 15
areas are significant differences between the prices published by the National
Housing Authority and those resulting from data collected from newspapers.
VII. In this paper they are also discussed economic, social and demographic impact
on the price of real estate. It concluded that factors such as employment, GDP,
the construction cost and inflation have an impact on the real estate Albanian
market.
32

33. Thank you!
33