The decision made in July to increase reference prices for apartments is expected to have a significant impact on the rising apartment prices in Albania.
According to decision number 457, published in the Official Gazette on July 27, 2023, the average reference prices per square meter of building area, used for assessing taxable values for housing in 32 cadastral zones, have increased significantly, ranging from 5% to as much as 76% when compared to the 2018 decision.
The Association of Builders has voiced concerns that this increase in reference prices will not only affect income taxes paid for property transactions but will also impact infrastructure impact tax payments made by builders, along with their obligations for the 3% social housing tax.
Members of the Association of Builders, in conversations with Monitor, have pointed out that the heightened tax burden within the construction sector will not only deter building permit applications but also result in increased apartment prices.
For instance, the infrastructure impact tax, which builders pay, is calculated at 8% per square meter based on reference prices. With the rise in fiscal prices, if, for example, the fiscal price in an area of Tirana, where previously it was 1,200 euros per square meter, has now surged to 2,000 euros per square meter, builders will be required to pay 160 euros per square meter for infrastructure impact tax, according to Luigj Aleksi from the Association of Builders.
Moreover, due to the increase in reference prices, the 3% social housing contribution will also be paid at a higher rate. In this scenario, any builder seeking to apply for a building permit will calculate construction costs before the application, and the additional tax burden will further increase these costs. This situation is expected to not only discourage building permit applications but also drive up apartment prices, as pointed out by Aleksi.
For these reasons, the Association of Builders has proposed, in a letter addressed to Prime Minister Edi Rama, that the implementation of the decision with increased tax prices should either be gradual or applied only to projects that commence and conclude after the decision takes effect.
Already, apartment prices have started to rise in certain areas of the capital. In one of the areas near the city center, apartments in new constructions are now being sold for 3,500 euros per square meter, compared to the previous price of 3,000 euros per square meter.
Similar price increases have also been observed in the “Paris Commune” area, where prices of new constructions have escalated to 2,200-2,300 euros per square meter, up from the previous rate of 1,900 euros per square meter.
Even in peripheral areas like Kashar, builders have reported maximum prices reaching up to 950 euros per square meter, compared to the range of 750-850 euros in the previous year.
