Despite its Mediterranean location, Albania’s property market has been totally ignored by foreign property seekers. This might be about to change.

A recent report drew an extremely favourable picture of the future of property investment in Albania. The country, which is currently one of Europe’s poorest destinations, despite positive developments, still suffers from virtually non-existent infrastructure, including its road and electricity networks.

Economically, Albania saw six per cent GDP growth in 2007, while at the same time retaining relatively low living costs. Political problems have prevented construction permits from being issued for two years. This was finally resolved at the end of 2007.

Among Albania’s main attractions for foreigners looking for an overseas property are the ease of getting financing; low transaction costs; no taxes on purchase, capital gains, withholding or inheritance; no value added tax on real estate purchases; no state or wealth taxes; no transfer tax; and high capital growth.

When looking at price rises, it has to be taken into consideration that before 2004 there was not really a market. However, as of 2005, desirable units in the capital Tirana and around the coast have been appreciating by around 30 per cent per year-on-year. Most experts predict that Tirana property values will show an annual growth of about 25 per cent in the coming years, thanks to a continued influx of expatriates, embassy staff, overseas government support and supply organisations.

About five years ago, there was just open countryside between the airport and Tirana. Now new commercial buildings line the main road into the city and companies such as Citroen, Hewlett-Packard and Peugeot have opened distributor sites in the country. Salaries are rising and over the past six years, city-centre apartment prices have quadrupled. Land prices have registered a threefold increase over the past year alone.

Average monthly apartment rents in the capital vary from 2.5 to six euro a sq m. Renting a house starts at 5.7 euro and can reach 19 euro a sq m. There is not really an established office or retail space market, especially outside Tirana, however, office rents fluctuate between 3.2 and 6.4 euro a sq m a month, reaching 25-26 euro a sq m in the capital’s centre. Commercial properties command similar rents. The cost of buying agricultural land varies between four and seven euro a sq m, but can reach 25 euro in some areas. The plots that were expropriated for public use around the upcoming high speed inter-state road, from the Albanian port of Durres to the Bulgarian port of Bourgas, may be as much as 70 euro a sq m.

The few restrictions on foreign ownership facilitate access by international buyers. They can make a commercial investment if its value exceeds three times the cost of the land, and, though agricultural land may not be purchased, it can be leased for 99 years. If a foreign investor operates through an Albanian legal entity, such as a subsidiary, the acquisition of construction land need not be subject to prior approval.

But like many countries in the Balkans, the biggest problem is clean title deeds. The Albanian government is still in the process of returning property to its pre-communist owners and disputes over ownership and forged title deeds can be an issue.

There are not many international renowned players that sell Albanian property. Research found that the UK-based Barrasford and Bird, and Emerging Markets Understood Ltd (EMU) operate in the market; Colliers consultancy has recently opened an office; and RE/MAX real estate agents are contemplating buying a franchise and entering the market.

“Rapid infrastructure upgrades, central European location and low labour costs are driving industry and tourism in the country to new levels. Incoming international companies are able to take full advantage of the country as a manufacturing and distribution hub, while tour operators such as Club Med and even Easy Cruise (budget cruise line) have identified the coastal areas as a profitable venture,” said Simon Feek, managing director of EMU.

Albania is sat on huge supplies of oil and other reserves such as chrome, which remain largely untapped. They are attracting many international companies wishing to bid for the right to drill and mine.

Less than 10 per cent of sales in the capital are made to foreign investors, which means that investment in Tirana is safe and sustainable, as there is a good demand for rental accommodation. A new “luxury” end of the market is developing as more foreign nationals come to Albania for their work and many wealthy expats return.

Residential units in the capital sell for between 500 and 900 euro a sq m and, with European banks offering 70 per cent LTV (loan-to-value) to foreign investors – available at rates of six to seven per cent, Tirana has to be the cheapest capital city in Europe to invest in, according to Feek.

Like the rest of the country, road infrastructure is being improved with a new ring road around Tirana which will be connected to other routes that are also under construction. They are all expected to open in the next 18 months. A new airport at Rinas, which is just 20 minutes from the city centre and the only international airport in the country, is serviced by many of Europe’s larger air carriers with direct daily flights.

Prices along the coastline are low, by comparison, starting from around 550 euro a sq m for off-plan properties and reaching as much as 1000-1200 euro a sq m.

The Albanian government is preparing for European Union accession in about 2012 and the country is expected to join Nato later this year, so, the country can no longer be ignored, EMU’s executive said.