The construction sector confidence index, which measures the sector's expectations for orders, prices, capacity utilization rate, etc., was at its lowest level in three years in November.
The index, which is measured by the Bank of Albania within the framework of the economic confidence index, asks builders questions such as:
-How has your construction activity been over the past 3 months?
-What are the main factors that limit your construction activity?
-How do you currently evaluate orders (ordering contracts)?
-How do you foresee the future performance of your business situation?
-How do you expect the prices you will set to change over the next 3 months?
-To what extent are you currently utilizing your production capacity?
-How has your company's financial situation been over the past 3 months?
According to the Bank, the Construction Confidence Indicator (CCI) decreased by 3.1 percentage points in November, falling to -8.9, the lowest level since November 2022, indicating that more and more builders are pessimistic about the future of the sector.
According to the Bank of Albania methodology, the balance indicator takes values between -100 and +100. An indicator above 0 indicates a greater number of positive than negative responses in a given period.
Expectations have changed compared to 2024, when the balance was positive in most months.
However, the Bank emphasizes that currently, its level is 14.4 percentage points above the historical average. The monthly decline was influenced by two components: businesses' assessment of construction activity and current orders. Price expectations continued to fall this month.
The balance of responses to the order contracts question was negative at -30, indicating that more builders expect fewer orders than those expecting an increase. This is the lowest level since October 2022.
Businesses are asked the question: How do you currently evaluate orders (order contracts)? 1. More than enough (above normal); 2. Sufficient (normal for the season); 3. Not enough (below normal).
Price expectations are also declining, although the balance remains positive at 8.6, but down from previous months when the indicator was above 10.
This means that the number of builders expecting prices to fall has increased, although those who think prices will increase are more than those who think prices will decrease.
Companies are asked the question: How do you expect the prices you will set to change over the next 3 months? 1. They will increase; 2. They will not change; 3. They will decrease.
Construction contribution declining
Other INSTAT data show that after an increase in recent years, the contribution of construction to economic growth is declining. In 2023, construction brought almost a third of the growth, while in 2024, the contribution dropped to 13%.
The high pace of construction, in a strange correlation that has little to do with supply and demand, or with rising incomes and wages, has only made apartments more expensive for locals, especially in the capital.
The average price of housing in Tirana has reached around 2 thousand euros per square meter, tripling compared to two decades ago and making the Albanian capital among the most unaffordable in Europe, in relation to purchasing power, according to Numbeo data, being an additional factor that has increased the cost of living, in addition to food products.
Despite the slowdown in orders, construction is expected to continue, based on the numerous permits that continue to be granted for skyscrapers.
In recent years, the National Territorial Council, which is the main institution that grants permits for large projects and multi-story buildings, has granted numerous permits, both for skyscrapers in the capital and tourist resorts on the coast.
In the last KKT meetings alone this year, at least 16 construction permits have been granted for towers in Tirana, which are taller than 20 floors./Monitor
