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Only Way is Up

Chatting with a taxi driver while back in Belfast a few months ago, he was intrigued when I told him that I was living in Albania. Did I think it was worth investing in property there, he enquired. Not unless you're prepared to risk losing your money, I replied. By the end of the journey he was considering Bulgaria instead.

Despite the risks, some people are starting to invest in Albanian property. The Daily Telegraph reports on Ian Warburton who recently spent 29,000 GBP (around 40,000 EUR) on a one-bedroom apartment in a new development in Tirana. "Given its location, I don't see how it can fail to work," he said.

The development is called Terra Nova and the apartments are being actively marketed as an investment opportunity by Barrasford and Bird, a UK property company. Here is their sales pitch for Albania:

Albania shares the same stunning coastline as Croatia and Montenegro. However, Albania has better weather and prices are about a quarter of those compared to it's (sic) better known neighbours. With direct flights from the UK, readily available mortgages and a safe legal system, Albania is destined to be the Next Big Thing in property investment. Get in now to make the most of this opportunity before prices rise.

With hundreds of millions of euros being invested in the country by the EU in preparation for EU entry in 2014 and NATO entry in 2008, investment into the capital city must be one of the safest and most lucrative investments in the world today.
Regular readers will know that I'm not into Albania-bashing, but this is absurd. A safe legal system? EU entry in 2014? (I suppose it's always wise to be cautious of claims made by people who don't know the difference between its and it's).

Of the development itself, they say:
Terranova is situated in a new business district being constructed within the city centre...[It] is a residential complex set in the vibrant and beautiful surroundings of Tirana.
I haven't explored this area lying beyond the ring-road up close, but it's not exactly central and it's not remotely beautiful.

There's no indication in the article that Mr Warburton has ever visited the city, so he appears to be making his decision entirely on the basis of the dubious claims made by this company. I hope it works out for him, though I suspect he may be waiting longer than he thinks to get his return.

Comments

sky said…
Hi

OMiT did you had some bad experience or why are you so sceptical.

I personally think now is the right time vor investing in Albania because later there will be less possibilities und less profit to make.

Investments are allways risky even in Germany where I live despite political and economic stability.

So my opinion: Use the chance and don't leave it for tomorrow. It kann be too late.

Tschüss (by)
Anonymous said…
Even though we live abroad we save our money in Albania because the rates are much higher there. As for investing, the sooner you/one does the better, considering what the prices were just 10 years ago and what the value is now.
You just have to pick the right location.
As for the villagers, it's a bit harder. In our village if we decide to sell it is restricted to the people of the same village, let alone different country.
I don't know about the condominiums in Tirana, who is going to live in them? They are so many and the birth rate in the last 20 years has decline from 2.1 children/woman to 1.6
Anonymous said…
If Albania is so bad, as you are discribing it, why are you living there? Making money, I suppose, Sir. Have fun, because Tirana is a great city.
our man said…
Sky, no bad experiences but even the people who are trying to market property in Albania are selling it as high risk.

Anon 1 you are making the same point as I am - investing here is high risk, it requires more knowledge than what you are going to get from the sales pitch of a property company.

Anon 2 - you have obviously never read anything I have written on this blog before. I'm not even going to bother responding further.
Reading the excerpt it seems tempting. I would like to know of which Tirana is the author talking about?!

I would love to be optimistic and say it is safe, but in reality is not.

It is still difficult to believe the government (it doesn’t matter which side) can presently guaranty or safeguard investors’ interests.

What Tirana offers to the people living in the city or to it's visitors has nothing to do with the subject of this post.
Every person with even the slightest signs of the presence of a brain knows that the highest the return the riskiest the investment. Not really rocket science. Real estate investment can be risky in any country, not just Albania. Can anyone care to check how much property values have plummeted in Detroit in the past couple of decades?
With that said, I really believe that investing in real estate in Albania is a very smart. In hot spots like Tirana or certain areas near the coast, property values are sky rocketing, and despite the incompetent govt, prices will only go up. That UK real estate agency does paint an overly optimistic picture, but I do agree with the fact that you can't go wrong with property in Albania. As long as you put your time into this and check the property out yourself and deal with a serious agency, you'll be fine. In fact, I plan on buying an apt in Tirana myself as soon as I can. Tirana will continue to grow because pretty much all the economy is concentrated there. All those students who graduate from Tirana universities don't go back to their original cities but stay there. I'm originally from Elbasan but now I know more people in Tirana than Elbasan, because if you have any sort of ambition or want a decent quality of life you better live in the capital city. This might change in the future but not any time soon, since all other cities are so far behind. I don't see why people think that Albania is so unstable that you could lose your money.

OMIT,
This is not a attack on you, so please don't take this the wrong way, but do you really think that if you owned an apt in Tirana someone else could just come and take it away from you???
I don't think this relates to any other city. Tirana has a lot of potential, but investments cannot be only limited to Apts. Whoever invests in just an apt. is pretty much family type of investment. As soon as you start having big developing companies then everything changes. A strong rule of law is needed, and that is very fragile in Albania. In compense there is only the law of "who knows who" to avoid any damage, if not to make money. It is still early.

You mentioned Detroit.. Well, check the crime rate in Detroit. One of the highest in US.
Actually, the highest per capita. Social issues there have a huge impact in the city's life.

That still has nothing to do with Tirana. In case there should be an example then why not go for a safe city where investments are sicured and safeguarded by local goverments.

Tirana and Albania can sure do better than this.
illyricum said…
Totally agree with OMT,

This is absurd, and I am Albanian and live here. The problem is that the area in question is not beautiful, is not clean, is not in central Tirana at all, and it is being sold with a promise of doubling in prices, which is not really the case since in the area you can buy an apartment for less 550€ per sqm and it has been so for the last 2 years.
Anonymous said…
I agree with Omit too.
There can be a profit, but not in 2 years. I guess for those in the Uk who have money to invest it's ok to let the property sit for at least 10 years and then reap what you can. Estate is the safest of the investments in the world. It doesn't hurt you if it just sits there. It takes patience and being realistic but in 10 years the largest Albanian cohort since the baby boomers, the echo boomers, will get married and move out on their own.


anon 1
Tirana Interior Design Community,

I am really not following you. What are you trying to get to? You're saying that we can't only build apts, but we are talking about a city here. It has to be almost exclusively apartments and commercial buildings. I don't see any one-family houses being built in the cities of NY, DC, Chicago, London, Oslo etc. Wherever the land is at a premium you can only build up. And I disagree that it's still early. Now it's the right time to invest, if you want the big returns later on.

And my Detroit example is spot on since we are not talking about a 3rd world country here, and it just goes to show that the real estate market can tank even in a country with rule of law. And in fact I can talk about pretty much any US city right now. I don't know if you're aware of this, but housing prices in the whole of US have been stagnant lately because sales have slowed down. This was in part because the subprime mortgage industry is losing huge amounts of money, and the underwriting of new loans has become stricter. So am I to assume that if I had bought a house in the US that didn't go up in price it had to do with the govt being incompetent?


illyricum,
I actually don't see anything absurd about it. The agency is promoting the property. Although they might claim things that you would consider false, it's all relative. You can't argue with subjective comments. It's the responsibility of every person to check out the property before buying it. I wouldn't buy property anywhere without checking it out first. Why should it be different for Albania? If someone wants to go buy what a real estate agents say (by far the worst idea ever) then it's their fault, not Albania's.
Anonymous said…
Even though tirana is not clean it is safe. Prices have gone up! You guys have no idea how much money people have made. They bought cheap land 15 years ago and sell it for a lot more now. It's impossible for Albania to get worse. Though I really wouldn't want Albania to be filled with foreigners, then it looses everything that makes it great.
our man said…
AlbNOVA - no I don't think if I owned a property here someone would take it off me.

But if I lived overseas and had a property here that I was renting out I would have all kinds of concerns. Before I invested, I would want to know everything about property law, about laws governing property agents, governing tenants, and I would want to know all about how well property laws were enforced by the legal system.

TIDC is right - rule of law is extremely weak here especially in certain areas, and one of those areas is property and construction.

My other key concern would be the potential for illegal construction near 'my' property. So I buy a nice apartment with a nice view of the mountains then someone else with the right money and connections decides they want a view of the mountains and builds a 12 floor block right in front of my window. It happens.

The key issue is still how much can you afford to risk - which is the same as asking how much can you afford to lose. If you are a foreigner and you 300,000 to invest, investing 30,000 in Albania is a good idea. If you have 30,000 to invest, investing 30,000 in Albania is crazy.
Bribers said…
An interesting discussion and one I have followed for a number of years in Croatia, Montenegro, Bosnia and now Albania. When I opened a Croatian real estate agency on an island four years ago, locals were amazed that Brits were buying stone ruins with no sea view for 50,000€ - why would a foreigner buy in those villages? The same has happened in Montenegro, and the same will happen in Albania. Brits are culturally geared to two things with property - prices always go up in time (look at the UK market) and there is always the new buy-to-let market in Eastern Europe.

Albania has a number of advantages to other countries for the UK investor, most notably bank financing on new developments, early mover advantage, beautiful beaches in a country with a poor image and bad infrastructure. Both the image and the infrastructure are improving and so now is a good time to buy, especially with the markets of Croatia and Montenegro reaching maturity.

Many of the people like the guy quoted above have never been and will never come to Albania - they see it as an investment which adds diversity to their portfolio.

I have been coming to Tirana for 6 months now and have rented an apartment in the centre. We are just about to launch www.buy-albania.com - once completed, it will promote both Albanian real estate but also Albania as a place to visit. Foreign interest in Albania, both property buying and tourism, is set to soar, as more people come back from Tirana with tales of what it is really like, not the ugly and offensive picture painted by A.A. Gill in the Sunday Times. Foreign businesses will come and I believe do well, and am pleased that the excellent Indian restaurant Ashiana is already expanding and now open in new larger premises near TV Klan.

I will be in Tirana for the whole of September and interested in meeting more Albanians, so if anyone fancies a beer and wants to educate me more about Albania, I would be delighted to meet you.
Albania Zone said…
Investing in property is pretty much about using your common sense. If any one is stupid enough to just buy on the word of a salesman without doing their own research or even visiting the development location, then they in all honesty deserve to buy a lemon.

There are some key fundamental concepts to keep in mind and that is check the pricing of surrounding developments, speak to local estate agents to establish the resale/rental potential, assess the proximity to services and transport links etc etc. At least that way you can go into your purchase with some idea of the likelihood of making it cashflow and an exit strategy.
Anonymous said…
Hi Thanks for both sides of the coin. i wanted to buy in craotia/Montenegro 3 years ago and missed the boat as they are above my income now so i am looking at Albania. It is very difficult to sort the wheat from the chaff of who is giving you unrealistic and realistic ideas of return but as it is coastal and wrapped around by countries in or joining the EU I think it is inevitable that it will in time go the same way and prices will rise to over the 1,000 euri mark per square metre in 2-3 years for Tirana and over 1500 for the coast.Sarrande has easyjet flying into Corfu a 25minute hydrofild away and the place is cheap and warm. trust in a good agent and a recognised develpoer must be essential and a good lawyer.

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