Monday, October 8, 2007

Albania Revisited

Once of the most popular blog entries I have made to date is Property and the Tipping Point, in which I discussed the possibilities of investing in real estate in Albania.

In the article, I argued that I thought that it was too early for their to be large gains in property prices for a number of reasons, the main one being that there is very little tourism to Albania at the moment and I didn't see that there is the likelihood of their being much in the short-term.

Since I wrote that article, I have received some new information that I thought was worth sharing with you.

Firstly I was referred to some statistics from the Albanian Statistics Office to show that tourism is increasing to Albania. In 2004 there were 645,000 tourists visiting Albania, with the figure rising by 100,000 per year. These numbers are higher than I would have anticipated, but are still not that large by the standards of any of the existing markets.

Secondly, my girlfriend recently met with a developer from South Africa who had been touring Eastern Europe looking for development opportunities. He said that he visited Albania earlier in the year, but didn't think that the infrastructure was ready to start investing in the territory. He mentioned the fact that it was quite normal for the electricity to be out for a couple of hours each day. Not something that the majority of mass-market tourists are going to find acceptable (I certainly couldn't put up with it).

Instead he is planning on investing in Romania instead, a decision that we at Propertastic! would agree with as the climate for investment in Romanian property is currently looking very bright.

Most damning of all though was a recent article by Athena Kalaitzoglou which I discovered on the SMAnalysis blog written by Stavros Markos.

The article is entitled "Investment in Albania - High Risk" and mentions the fact that there is widespread corruption in the country and a severe lack of a legal framework.

It mentions that the government coffers are currently empty and so the country's finances are being supplemented by imposing fines on foreign investors for the most arbitary of reasons.

The article goes on to mention that there are often ownsership issues with regards to land and property. It is easily possible to buy some real estate, only to find that other payments are due down the line in order to clear up ownership issues, meaning that the overall cost can end up as being three times the initially agreed purchase price.

The article also mentions the same facts about power blackouts that we heard from the South African developer.

Another blog entry by a British expat who has been living in Albania's capital, Tirana, on July 4 also gives a similarly pessimistic view of the current potential for investing in the country. He has been living there for many years and so knows the market firsthand.

In summary, I am even more sure now that it is just too early for Albania to be a serious investment target, even though beachfront property is still very cheap compared to neighbouring Montenegro or Greece. Sure, if you have a large property portfolio it might be worthwhile making an investment as part of a longterm strategy, but it's going to be on a high-risk basis for a long time to come.

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