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.

Why Are Old Media Property Tipsters Rubbish?

This is related to my last posting about journalistic integrity and which news is worthwhile circulating and which is not.

Just three weeks ago, my search for news came across an article from the UK's Sunday Mirror entitled, "Is Turkey The New Spain?" While the information contained within the article is not wrong, it is written in the style that the journalist seems to believe that she is the first to think of the possibility of investing in 'a brand new, developing market'. Although she goes on to contradict herself by saying that there is already an oversupply in some parts of the country.

While Turkey is still a good market to invest in and there is definitely money left to be made there, people have been buying there for man years already and I consider it as one of the more established markets - certainly the most established of the 16 that we cover on Propertastic!

It's not the first time that I have seen the UK's old media (newspapers and TV) get all excited about some market that is already way, way past its initial growth period and is starting to mature, so that all of the fast money has already been earned.

It seems to be the same for all newspapers - even the 'quality press' such as The Times and The Daily Telegraph always seem to be way behind the curve when it comes to their property tips. It's very rare that I find anything in any of their property supplements that is real 'news' to me and is thus worth passing on to Propertastic's visitors. The most useful information always seems to come from the English language newspapers in the markets themselves such as The Sofia Echo, the Turkish Daily News and the Warsaw Voice, all of which produce some excellent and fresh information relating to their local real estate markets.

So why is this the case? This is a genuine question to which I would invite any comments upon, because I really don't have a clue as to why the newspapers are so laggardly with their overseas property market coverage. OK, the TV shows I can understand are never going to be cutting edge - they have long lead times and are there for 'infotainment' and not news. Monthly magazines are also going to be up to three months late with their news.

But for the quality press in particular, I am clueless. Their pieces are presumably written by professional journalists with access to a wide variety of resources. Most of them publish material only once a week and so they should have plenty of time available to make some detailed research on markets. So why don't they? The property pages of the newspapers are always packed full of advertising, so I would have thought that it would be very much in the newspapers' interest to provide great coverage in order to attract the maximum amount of readers to the section.

Maybe this gives a clue as to the real reasons though - to keep advertisers happy. It's better for them to write yet another article on major markets such as Bulgaria, Turkey - or one of the even older favourites such as Spain, France or Cyprus because they have plenty of existing and potential advertisers who want to see positive coverage of these markets. If they instead concentrated on real new hotspots such as Montenegro or Romania, then they have less advertisers to benefit from.

This is just a wild guess as to what their motives are. Honestly, I have no real idea as to whether it is an editorial policy, lazy journalism or what.

No, if you are really looking for tips as to where the best places are for investment, you are better off forgetting about traditional media and concentrating on the Web. Of course I rate Propertastic! very highly as one of the best sources of information, but I would say that, wouldn't I. After all, its opinions are mine!

But in the interest of fairness I would also say that there are some other good resources on the Web (not too many though) that give some excellent tips as to up and coming markets with the potential of making excellent and fast returns.

The ones that I rate highly are:

Property Secrets
Amber Lamb
Global Property Guide

There are also some interesting tips on the Totally Property forum if you take time to search for them.

But as for the old media, the only use for them I can see is to keep an eye on them to see what Mr. and Mrs. Average - the Johnny Come Latelies - are starting to get interested in. Because when the mass market is starting to buy in a big way, it usually means that it is time to start planning your exit strategy because this will be the last wave of buyers into a market before it starts getting totally over-exploited (such as Sunny Beach, Bulgaria). If you miss your chance to sell to them, you might not get another one without selling at a significant loss.

Please feel free to add comments if you disagree with my opinions - I am most certainly open for a debate on the issue.

Property and ‘The Tipping Point’

In my last entry, I warned of the dangers of ‘following the herd’ and ignoring common sense for the sole reason that ‘everyone else thinks it’s a good idea’ because you risk getting into a market just as everyone else decides that it’s about time to get out.

So getting into a property market too late is definitely a bad thing to do. But is there a danger at the opposite end of a spectrum? Is it possible to get into a market too early?

These thoughts have been on my mind for the past few days because Albania has been on my mind. It first came on the agenda because my girlfriend is looking for a new job. She started as a real estate agent in Latvia in April, which proved to be very unlucky timing for her as it exactly coincided with the downturn in the market – the result being that very little property is moving in Riga at the moment, so she’s not earning any commission.

I told her in May that I thought that she should get involved in selling overseas property in Latvia. As was the case in the UK ten years ago, Latvians now realize that there is good money to be made in buying property in an emerging market and, if there aren’t any gains to be made at home, then it’s time to look elsewhere to catch the next wave.

She wasn’t convinced at that time that it was a good idea but, sure enough, there has been a large number of companies established here that have started selling overseas property to rich Latvians. Many of them are selling the same Bulgarian properties on the Black Sea that the Brits are getting a bit wise to the problems of.

But anyway, she has an interview on Monday with a company selling property not only in Bulgaria but also in Montenegro (now that’s better!) and, interestingly, Albania.

The same day, I saw some articles that were based on a press release from UK developer Barrasford & Bird publicizing a new development that they’re promoting in Albania.

I haven’t done a lot of research into the market in Albania to date because I considered it too small and undeveloped to be viable yet, but I began to ask myself whether now was the right time to start looking at it or is it still too early?

Perhaps like you, I have been constantly kicking myself for not having bought in markets earlier. “If only I’d bought in Montenegro last year,” I sigh or, “prices in Sharm el-Sheikh are up 20% already this year – I should have bought there in December.”

But what if I’d bought in Montenegro or Sharm el-Sheikh five years ago? What would have happened is that I would have seen the value of my investment hardly increase at all for the first four years of that period. I would have been a lot better off investing in Bulgaria or Latvia.

So what influences the timings? One of the most influential books over the past few years has been Malcolm Gladwell’s ‘The Tipping Point – How Little Things Can Make a Big Difference’. In it, he talks about “social epidemics”, or sudden and often chaotic changes from one state to another. In all of the examples he gives, changes do not happen steadily or regularly – there is a sudden breakout, which is better explained by the graph below:
Take the Internet as an example, once again. For several years, the only people using it were a bunch of academics and computer geeks. Then, in the mid-Nineties, everyone suddenly discovered it and, within just a few years, everyone was online.

So why do these changes suddenly occur? If you’d really like to know, read the book, or a synopsis of it here.

Looking at the graph, it’s easy to see that the same curve can be applied to all of the other property hotspots in the past, so it’s almost inevitable that it will happen in territories like Albania as well. The only question is: how far along the curve is Albania at the moment?

The other factor affecting property prices is the basic economics of supply and demand once again. Prices are only going to start skyrocketing if demand substantially exceeds supply.

Is that really the case in Albania today? Probably not. Not yet, at least, but it is sure to come. The trick is to predict exactly when. Ideally you want to get in just before other people start talking about it. The fact that I’m talking about it here and you’re reading about it shows that the process is already starting.

Albania’s big plus point is that it is the last remaining piece of the European Mediterranean to be discovered. If you want some beachfront property in Europe for under EUR1000/m2, Albania is your last chance of getting some.

On the downside, however, Albania was, by far, the most screwed up country in Eastern Europe and there is a hell of a lot of work to do to bring it up to European standards. There’s also traditionally been a lot of organized crime in the country which the government is struggling to tackle.

But let’s go back to supply and demand for a moment. In order for there to be strong demand, someone is going to need to occupy the properties – the economics of jet-to-let simply don’t work if a property lies empty. So who is going to be living in these new apartments?

Local Albanians? No chance – the only people with money in Albania at the moment are the mafia dons, and they’ll be buying their own palaces for sure – not renting 60m2 off you!

Ex-Pats? Doesn’t really have all of the comforts of home, does it? I think that even the most adventurous of souls would think twice about moving from Basingstoke to Vlore just yet.

Tourists? Do you know anyone who’s been on holiday to Albania yet? Or anyone who’s considering it? I didn’t think so. There isn’t really any tourism infrastructure in place in the country yet – most important of which are charter flights into the country, let alone some decent hotels in order to accommodate them once they are there.

“But what about Bulgaria and Montenegro?” you may ask. “Their tourism industry grew very fast.”

This is true, but you need to remember that Bulgaria and Montenegro were major holiday destinations for Eastern Europeans all through the years of Communist rule, so they didn’t need to build a tourist industry from scratch – they just needed to bring it up to Western European standards.

In summary, although such cheap prices for beachfront property do seem very attractive, I don’t think that they will see the same rapid growth as Montenegro and Bulgaria has witnessed until the Albanian Tourist Board is able to start attracting tourists to the country in significant numbers. Personally my strategy at the moment will probably be to buy in Egypt, keep the property for two or three years and then the time might be right for Albania.

Our First Customer Feedback

The first press release spread throughout the Web quickly and the site received its first few visitors. One of them, as we had requested, was kind enough to contact me with some feedback.

Here’s what he wrote:

Budget flights to Belgrade and Podgorica

Hi,

On your key statistics page, you have said there are no budget flights to either Serbia (Belgrade) or Montenegro (Budva or Podgorica)

I would say that Jatlondon.com has some pretty reasonable flights (eg under £100 return) to Belgrade & Podgorica.

ThompsonFly have very reasonable flights to Dubrovnik in Croatia which is only an hour's car journey from Budva. (I paid £64 for a return flight at the end of May booked 5 days beforehand.)

Best regards


Davie

I was so excited at getting feedback from a real live visitor for the first time, just three days after the site had gone live, that I got back to him immediately:

Hi Davie,

Congratulations! I just wanted to let you know that you are our first real visitor to the site who has taken the trouble to drop me a line.

The site only went live in the wee small hours of Tuesday morning and so we're still ironing the bugs out at the moment.

I feel like I should send you a medal or a bottle of champagne or something, but we've spent our entire budget on Latvian codemonkeys to build the thing!

So at this moment, all I can offer is my sincere thanks for being the first of hopefully many visitors to the site.

How did you find us, by the way?

As for your comments about the flights, yes you're right that the cheapest way to get to Montenegro is via Dubrovnik. We mention this in the Buyer's Guide to Montenegro section.

The problem with compiling the 'Key International Property Statistics' is that there are many cases where there is no definite 'yes' or 'no' answer, but that it should really say 'depends'. But I wanted to avoid adding pages and pages of footnotes to the information there as it's complicated enough already!

Thanks again for taking the time to contact us. I think I'm going to head off and frame your email now!

Have a nice weekend.

Kind regards,


Nick

Davie was kind enough to indulge my craving for information and got back to me later that evening:

Hi Nick,

I feel privileged to be your first visitor. Thanks.

I found your site whilst looking for news about Montenegro in Google news.

I have a property in Montenegro that I bought for investment purposes and I tend to watch fairly closely how Montenegro's boom is being regularly reported (especially recently in UK newspapers)

As well as Monte, I keep an eye on the property markets & what's happening in Serbia and Albania - Now there's a high risk/possibly ?! high reward market for you - I guess you'll add this country to your guide at some point.

As to your site ... well I think its nicely laid out. I like the idea of a seperate area for businesses to add their links if they wish and the directory is a great idea. It would be an idea to add some contacts to some of these directories to get things started. (I've added a link to the Bar Association for Monte under Lawyers) The quick guide is fine and the guides are an OK starting place.

Some (hopefully) constructive criticism - perhaps you should think about going into more detail in your country guides (such as the Red Guides and some other magazines attempt - though they do charge a helfy price for pretty obvious info) You could add more info as to where in each country are the (possible) hotspots and interesting possibilities off the beaten track (eg skiing resorts in Monte/Lake Skadar etc) - not just the capital cities - and not just off-plan properties - I never go for these having heard so many horror stories about developers not delivering. For example, having visited Poland recently, some tertiary towns such as Gliwice, Nowy Sacz and Lublin and some of the smaller mountain towns (eg Zywiec, Wisla) are experiencing greater gains than the likes of Krakow, Warsaw and Wroclaw. The guides could also include a little more info about the actual countries and the people.

I must say that nothing beats actually visiting these countries and meeting local agents and foreign property investors and it's obviously difficult to try to give a lot of info i n a couple of pages.

In addition to Albania, have you considered including Moldova & Ukraine ?

Anyway, best of luck.

Best regards

Davie

I do like to write and, if someone takes the time and trouble to give me their thoughts then I am more than willing to reply with my own:

Hi Davie,

Thanks for coming back to me so quickly and with such a detailed response.

At the early stage of the site's development, feedback like this is like gold dust as it's easy to get into a 'can't see the wood for the trees' situation after living with the thing for six months.

Albania - did you read this piece plus the comments on it?:

http://ourmanintirana.blogspot.com/2007/07/only-way-is-up.html

The plan is definitely to fill in the gaps when it comes to countries such as Albania, Moldova, Bosnia and Macedonia. We needed to make a start somewhere though and to cover 16 is taking enough resource as we've got at the moment.

Thanks for the link to the Montenegrin lawyers. There was supposed to be more entries for the directory before the launch than there are, but the guy who was filling it in for us quit a couple of weeks ago and so didn't get to finish it in time.

You're right that more detail would be useful. This is certainly in the plan - we're just at that 'journey of a thousand miles starts with a single step' stage at the moment.

The techies are still at the end of my 'need to have' list at the moment before they can start on my 'would like to have' list - these are the things that we hope will take it from a good site to a great site.

As it says in the About Us section of the site, the idea for it came about because I had bought together with my girlfriend a couple of cheap apartments in Latvia which doubled in price in 18 months. I feared that the market was over-heating and so was looking to get hold of some data where I could see all of the statistics of all of the other Eastern European countries side-by-side. After hours and hours of Googling, I was still none the wiser. The information is all out there on the web, but it took a massive amount of time to assemble it all together. I noticed that other sites covering these subjects 'cop out' if information is difficult to get hold of and just talk in generalities rather than real numbers.

I noticed that not many of the other property sites are using 'Web 2.0' concepts in terms of attempting to form a community of users who are contributing their collective wisdom to inform one another. One of my favourite sites these days is tripadvisor.com and I wanted to apply the same concepts that they do.

No single person is ever going to have enough knowledge about all of these markets to cover all of the possibilities for investing in 16 different countries. As we all know, two properties just half a mile from one another can have totally different levels of potential, so a site like ours is only ever going to be a very broad starting point. But after inputting all the data and seeing the stories that it told, together with the latest news from each of the countries, I could see which countries had the most potential - and this is not something I was able to get from any other site I visited.

The next phase is to get local 'stringers' in each of the market translating content from the local equivalents of the FT because there's a lot of information from the local markets that never gets translated into English. The Latvian press has been saying that the market here has been on its way down for three months now, but very little of this has filtered onto the web yet. Good news spreads fast on the web because there are sales agents all trying to hype their developments, but they're going to keep quiet when the news is not so rosy.

Before that though, I'm planning on producing podcasts for each of the countries - basically phone interviews with agents in each country. Of course they'll all be trying to sell their territories hard, but I'll be asking them tricky questions so it's more than just more PR-puffery.

And then the plan is to go out and visit the markets with a video camera and shoot some content, like a grittier version of A Place in the Sun?

Before we do all that though, we need to get a few advertisers onboard to fund all my megalomaniacal dreams!

From what I understand, Moldova is in a similar situation to Albania, though I believe that it is slightly more screwed up than Albania and doesn't have any nice coastline either.

I was in Kiev last summer for the first time and couldn’t believe how much development there's been already - it was like being in Dubai. The prices and the rents there looked totally insane to me. I think that Western Europeans should stay well away from it - the Russians have been buying up the country for a long time already and so they're the ones who've already made the easy money from the country.

As you may have noticed, we're also in the process of finishing the Russian version of the site. As they're the other big buyers in Eastern Europe (as you're obviously aware from being in Montenegro) they deserve their own version of the site.

Anyway, I'm sure that I've rambled on enough already, but thanks again for the advice and for listening to me.

Have a very pleasant weekend.

Kind regards,


Nick

So, as you can see, I am always interested in receiving feedback from visitors – whether by email to nick@propertastic.com or as comments on what I am writing here. And you can be sure that you’ll get a detailed reply (well, unless I start getting swamped, that is!)