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3-month home loan declines for the first time since 2020

2026-05-04 07:18:47, Ekonomi CNA

Home loans closed the first quarter of the year in decline, for the first time in the post-pandemic period.

Bank of Albania data show that for the period January-March, the banking sector granted a total of 13.5 billion lek in new housing loans, 14.9% less compared to the first quarter of last year. Loans showed signs of growth during March, but the result of the quarter was determined by the significant decline in the first two months of the year.

The decline in home loans follows a multi-year cycle of rapid growth. In 2025, home loans increased for the seventh consecutive year, by 17.3% compared to 2024.

The beginning of this year has brought a slowdown, while, according to the survey of lending activity with banks, individuals' demand for credit was also reported to be declining in the first quarter of 2026.

Banks reported that the lower demand for loans to finance the purchase of housing was driven by delays in the adoption of the guidelines that should accompany the law on the revaluation of real estate, but also by regulatory restrictions in force since July 2025.

Market sources indicate that some banks have decided to be more cautious in this segment, also due to concerns related to the real estate cycle, especially in the capital.

Starting in the middle of last year, the Bank of Albania began applying restrictions on new lending standards for home purchases, attempting to curb loan growth in the individual segment.

The loan-to-value ceiling in Lek is set at 85% for the first home and 80% for the second home, while in foreign currency the allowed limit is 75% for the first home and 70% for the second home.

While the debt service to income ratio for loans in Lek is at the level of 40% for the first home and 35% for the second home. In foreign currency, the ceiling level is 35% for the first home and 30% for the second home.

Also, precisely due to the rapid growth of real estate lending, the Bank of Albania applied for the first time a special capital addition to the banking sector's capital requirements. The countercyclical capital addition was set for the first time at 0.25% (to be implemented from 30 June 2025) and was further increased to 0.5% (to be implemented from 31 December 2025).

House prices have been rising rapidly in recent years. The increase, in average terms, continued last year. The Fischer Index calculated by the Bank of Albania showed that the average price of houses sold during the second half of 2025 increased by 28% compared to the previous year.

However, annual price growth slowed from the 41.7% rate reported in the first half of 2025. In particular, for the capital, the market appears to be slowing significantly. The sales price index in Tirana increased by 4.4% compared to the previous year.

The annual price increase suffered a drastic drop from the level of 32.6% in the first half of 2025. The Bank of Albania estimates that the main contribution to the increase in the value of the general price index was made by the increase in the value of the index calculated for coastal areas./Monitor.al