A Real Estate Investment in Tirana, Albania? - The Wandering Investor

A bit of background on Albania

If you read the Wikipedia page on Albania, you’ll be left with the impression that the long communist period starting in WW2 until its demise in 1989 fostered great development and a solid economy.

Even though it goes on to mention violent religious persecution, Wikipedia is essentially saying that communism in Albania was an economic success. In reality, the whole economy was centrally planned and Albania was one of the most isolated nations in the world.

Interesting fact: People were NOT allowed to own cars under communism. Car ownership was restricted to a few party bigwigs, resulting in Tirana only having a few dozen cars rolling the streets.

Communism was such a tremendous catalyst for human and economic development that 20% of the Albanian population emigrated within the first 10 years of its demise (1990-2020). Essentially, as soon as people could leave without being tortured if caught, they were out.

When you take into account people who wouldn’t leave, like government workers (useless everywhere) or old people (can’t go anywhere), it was a massive exodus of the working age population.

The real estate investment market in Tirana, Albania

When I arrive in a European city to analyze real estate, I typically like to check out the “historical” center to use as a benchmark. However in Tirana’s case, there is no real area with residential buildings of historical importance (from a financial point of view). There aren’t really any old buildings with notable historical architecture.

So what you find is mostly a mixture of low quality communist buildings, and post communist buildings of various quality standards.

Prices per square meter range from €500 to €2500 depending on the area and buildings.

It is clear that Tirana is experiencing a construction boom, with large buildings mushrooming everywhere.

Boomtown, bust is it really?

My first surprise was experiencing how slow and apathetic most real estate agents were. I visited a few real estate agencies, yet nobody was able to organize a viewing. The agents wouldn’t even propose other apartments; they would just vanish.

I haven’t experienced this anywhere before. Typically, agents are on my case hoping for a sale.

I finally found a proactive agent who showed me a few apartments. I wanted to see a middle class apartment targeting the local market, and the “best of the best”.

The first one is located a 20-25 minute drive from the center, in a middle-class area between the Botanical Gardens and an artificial lake. It’s a nice area with quality real estate being built, which will increase the desirability of the area over time.

real estate investment tirana albania — Between the Botanical Gardens, a nice artificial lake, and a 25 minute drive downtown

The apartment itself is 105m2 on the first floor, and has an underground parking space. This is key, as both traffic and parking are troublesome in Tirana. It’s available for €85,000 which is €810 per m2.

Overall, it’s great value for an apartment in a reasonably good neighborhood, not too far from the center of a European capital city.

If you negotiate the price down to €80,000, and add €12,000 for closing costs, a bathroom renovation and furniture, you end up with a total cost of €92,000

You can expect to receive €400 per month. It must be noted that liquidity, both for sales and rentals, is low.

+ 1 year rental based on €400 per month	+ €4,800
– 15% vacancy	– €720
– Management fees & finders fees 15%	– €720
– Maintenance & various (property tax, etc) 12%	– €572
– Income tax 15%	– €502
Net, net income	+ €2,370
Yield on total purchase price of €92,000	2.6%

These are hardly inspiring numbers. It’s possible to find better deals if you look hard enough, but given the low liquidity in the rental market, notwithstanding all the upcoming inventory, yields are unlikely to increase much. So while it’s cheap, you end up with a relatively low-quality building in an okay neighborhood, producing very low yields. It’s not a compelling investment.

I also wanted to see the best of the best and so was taken to a new building, right in the center, with a view of the whole city and of a nice downtown park. I specifically asked to see the penthouse on the top floor. This apartment is 193m2, going for €2500 per m2.

The best views in Tirana

I was expecting the apartment to be finished, but it’s on the purchaser to put the tiles, kitchen, bathroom, and pretty much everything. So yes, you get the best views in Tirana, but they come at a steep price. Add another €200 per m2 for closing costs, finishings, furniture, and the like. You easily get to €2,700 per m2 for this large 3 bedroom apartment.

For this price, you get the best in Tirana with a unique view that will never be obstructed.

In terms of rental revenue, you could expect €1300 a month, but again, liquidity is low. Needless, to say, the returns are pitiful. Your objective in buying this apartment is either lifestyle, or just buying AAA real estate in an emerging European country, hoping it is a good store of value, and maybe a source of capital gains in the future.

An important factor to take into account is that Albanians count the m2 differently than in most countries. They seem to take into account the whole surface (without excluding walls), and even a portion of the common area on the floor. So each apartment gets allocated a certain percentage of the corridor and space in front of the elevators, which effectively raises the “true” m2 price.

I don’t see any immediate catalysts for an upwards re-rating of property prices in Tirana.

Also, don’t forget the currency risk.

Taxes on Real Estate in Tirana, Albania

It is noteworthy that Deloitte’s tax summary on Albania is much, much longer than those on other countries. Apart from Albania’s simple 15% capital gains and income tax rates, everything tax related is complicated. Albania hasn’t gone through reforms unlike its neighbors North Macedonia and Montenegro.

Is an investment in Tirana Real estate, Albania, worth it?

No.

There are too many negative considerations:

Too much cash being laundered through construction and real estate, resulting in constant oversupply.
A large diaspora investing in real estate “back home”, driving up the supply of rental properties.
Not enough potential tenants.
No short-term catalysts for any improvements.

Essentially, you’d buy an asset with little chance of short to medium appreciation, with very low yields, in an unreformed economy where managing a property from afar would be complicated.

Sure, real estate in Tirana, Albania, is good value, but for now it’s more of a value trap.

A few interesting points to know about Tirana and Albania, beyond a real estate investment

There are rumors that Albania might launch a citizenship-by-investment programme, which sounds very interesting. It’s not a bad passport.
Non-residents can open bank accounts in Albania by simply showing up at a bank, and can even get access to credit cards if they block some money. The service won’t be amazing, and expect some complications with international transfers as Albania is on the High Risk Jurisdiction list of the FATF. It’s a low-cost option nevertheless for nomads who struggle to obtain credit cards.
Food in Albania is THE BEST in the Balkans. Many Albanians went to work in kitchens in Italy and Greece, thus coming back with amazing culinary skills. Restaurants are also dirt cheap. I had a true feast in Tirana.
Americans have the right to stay in Albania for 12 months – there is a special visa regime for them. It can be a perfect base for Americans wanting to live in Europe full time. Tirana airport has many low-cost flights to cities all over in Europe.
I see the coast has some of the cheapest beachfront real estate in Europe. It sounds intriguing and promising. I’ll probably go investigate at some point, but not this year.