The monthly amount of home loans provided by the banking sector marked a record value during May.
According to data from the Bank of Albania, commercial banks disbursed ALL 3.8 billion or almost EUR 31 million of home loans in one month.
This brings the total value of home loans granted during this year to ALL 14.3 billion, an increase of 76% compared to the same period last year. For 2021, home lending is reaching higher figures than ever before.
The banking sector is supporting the new growth cycle of the real estate market, which was not even curbed by the pandemic, and even gained a further momentum starting from the middle of last year. By the end of 2020, sales agents estimated that about 60% of property market transactions were financed by loans.
Albanian families are seeing property as a good investment for the future. The strong rise in prices in recent years and the expectations that this price increase will continue are encouraging investment in real estate. The increase in property prices is in itself a factor that affects the growth of credit volumes, because rising prices make the share of investment financed by credit higher. According to the Bank of Albania, property prices in Albania increased by an average of 11.3% last year.
Rising prices are also a factor that reduces the credit risk for banks, as they hold as collateral properties with higher value and with the expectation of gaining even more value over time, if this tendency to increase pricing continues.
The decision of individuals to buy houses on credit is also being supported by low interest rates and the high supply of banks for this product. For banks, home loans have among the lowest non-performing loan ratios, approximately half the average non-performing loan ratio for the total loan portfolio.
Due to the long maturities, this product enables banks to steadily grow their loan portfolio on time, which means assets that provide longer-lasting income and have a slower amortization over time. Home loans provide satisfactory lending volumes, but at the same time a good risk distribution to many borrowers.
At the end of May, the bank loan portfolio for housing purchase reached the value of ALL 133.5 billion or almost EUR 1.1 billion. In one year, the home loan portfolio increased by 11%, a rate significantly higher than the average growth of credit to the economy during the same period./monitor
