The growth of sales in the construction sector in 2023 is inhibited

2024-03-26 07:48:00, Ekonomi CNA

After double-digit growth in 2022, the pace of volume sales in the construction sector has somewhat slowed down in 2023, according to data that INSTAT has collected on construction companies.

Usually in the last 3 months of each year there is an increase in sales in apartments, due to the purchases made mainly by immigrants in this period (see the attached graph).

In the last 3 months of 2023, the volume of construction sales increased by only 1% from the 16.1% that was the increase in the last quarter of 2022.

Throughout the quarters of 2023, volume sales growth rates were lower than in 2022.

For example, in the second quarter of 2023, sales volume increased by only 0.2%, in the second quarter the increase was 5.2% from 11.5% in the same period of 2022.

Despite the slowdown in growth rates, construction and sales volumes are increasing in the construction sector, even though demographic indicators and high inflation are not curbing this trend as in Europe.

The real estate market in Europe is in a stationary phase due to the decline in demand, as the war in Ukraine has created a negative psychological effect for investment in real estate.

Despite the slowdown, local builders remain optimistic. After a drop of 8 points in January 2024, the construction confidence indicator measured by the Bank of Albania increased by 6.8 percentage points in February. This indicator is about 25 percentage points above the long-term average.

The increase this month was largely driven by better estimates for current construction activity. In parallel, expectations for future employment and prices are rising. On the other hand, the consumer confidence index increased due to large purchases in the first two months of 2024.

The construction sector experienced a rapid growth after 2016, mainly in the housing sector. The record-breaking increase in permits and acreage under construction in the past five years comes at a time when the population is shrinking and aging from declining births and high youth immigration. Contrary to these developments, the price of housing has increased rapidly.

Construction has become the engine of economic growth in recent years. In 2022, the sector contributed 11.1% points of value added from the 9.4% points it contributed in 2019. This contribution increased further in 2023, the preliminary data refer.

Currently, Albania is the poorest country in Europe and has the highest exposure of the construction sector on the continent. According to Eurostat, in 2022, construction contributed 11.2% of gross value added, while in the EU, this sector contributed 5.5%./ Monitor Magazine