Albania overview

Massive EU funding
Future NATO and EU memb
er
Investor-friendly environ
ment
“Albania’s real charm lies in its coastline,
which stretches more than 200 miles
from the Adriatic, in the north, to the
Ionian, in the south.”
The Sunday Times, August 2007

“We are very confident that Albania has

a bright future and can look forward to
sustainable growth.”
Colliers International, May 2008

“There are no major differences between

[Albania’s] political parties in the realm
of economic or foreign policy, as all
participants tend to be pro-EU and
pro-NATO.”
Albanianeconomy.com

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Albania
For so long closed to the outside world,
Albania is now relishing the chance to enter
the world stage. With high levels of EU
funding pouring into the country to improve
its infrastructure, and a government keen to
attract foreign investment, the conditions
are right to support excellent capital growth.
Featuring some of the last undeveloped
coastline on the Mediterranean, Albania is a
property success story waiting to happen.

Croatia Montenegro
How to get there
Serbia
The Mother Teresa International Airport in Tirana has recently been
Lake Soulari
the subject of a major upgrade. A new €50 million modernised
Shkodër terminal opened in March 2007 that increased the airport’s
Shëngjin yearly capacity to 1 million passengers. As that figure had already
The Former been surpassed by the end of 2007, the airport has invested
Yugoslav
Durrës
Republic of an additional €30 million in another expansion scheme, due for
Adriatic Sea
Tirana Macedonia
completion in 2009.
Lake Ohrid
Elbasan
Lake Prespa
Several international airlines fly direct to this airport from cities
Albania Korçë including London, Athens, Budapest, Vienna, Munich, Cologne,
Vlora
Milan, Barcelona and even New York.
Strait of
Italy Otranto
BA and Albanian Airlines serve the UK (from London Gatwick
Sarandë Greece and Stansted) but many budget airlines fly there from Italy and
Ionian Sea central Europe, boosting tourism and creating greater demand for
accommodation. This will ultimately encourage other carriers to
include Tirana in their destinations.

Albania at a glance
Area: 28,748 km2
Capital: Tirana
Population: 3,600,523
Currency: Lek (ALL); 1 ALL = £0.0055; £1 = 180.711
Climate: Temperate; dry, hot summers; cool, wet winters
Languages: Albanian (official); Greek, Vlach, Romani, Slavic dialects
Government: Democratic
Local time: GMT+1

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Why invest in Albania?
While prices in some parts of nearby
Croatia and Montenegro have
rocketed to €10,000 per m2, a slice
of Albanian coastline can still be
purchased for around €800 per m2.
Tirana- Albania’s busy capital
Jal beach, on the coast of Vlora
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Tax incentives
Foreigners are free to buy land, residential property and
commercial units in Albania. And they enjoy all the same
tax benefits as the locals do, which means no VAT or
capital gains tax, and no state property, withholding or
inheritance tax – even the 3% stamp duty is payable by
the seller. See the table on page 7 for more details.
The last resort
Albania remains one of the last chances to buy coastal
property in Europe at affordable prices. While prices
in some parts of nearby Croatia and Montenegro have
rocketed to €10,000 per m2, a slice of Albanian coastline
can still be purchased for around €900 per m2. The
country might not be as picturesque as the other Balkan
hotspots but its equally pristine waters, rugged mountains
and unspoilt beaches make it an affordable substitute to
its Adriatic neighbours.
A European Union
Albania embarked on the road to EU membership in June
2006 when it signed the Stabilisation and Association
Agreement (SAA). Widely acknowledged to be the first
step towards EU accession, commentators predict that
Albania could become a full member of the EU as soon as
2014. Before that NATO membership is planned for July
2008.
Infrastructure
Under the PHARE and CARDS schemes the EU has so
far allocated a financial assistance package of more
than €422 million to help Albania’s reconstruction and
development. A new thermal energy plant (a commodity
the current prime minister, Sali Berisha, plans to be
exporting by 20111) is being built in Vlora. Durrës, 35km
from the capital Tirana, is receiving an €80 million
investment from the EU to renovate its gateway port.
Also planned is an arterial road that will link Albania
directly with Dubrovnik in Croatia. Several other new
highways have already been built slashing journey times
to key destinations from the capital Tirana.
Political reform “There are fresh efforts to reduce
Albania spent four decades as a communist dictatorship
and had a problematic shift to democratic rule. Now corruption, increase transparency
the EU wants the country to embark on a series of and encourage foreign investment.”
reforms focussing on ensuring political integrity, election
standards and freedom of the press to accelerate FT.com
accession to Europe. These reforms have the extra
benefit of challenging the negative perceptions of the
country too.

Economic growth
The Albanian economy is growing by around 5% per year2.
This figure is higher than the European average where
even the strongest economies such as France and the
UK are only achieving annual growth of 2-3%. Foreign
investment has increased fourfold to more than
US$2 billion in 2006, and banks including Raiffeisen,
Societe Generale, Credit Agricole and the American Bank
of Albania have now set up offices in the country. Looking
ahead, the government is committed to an ongoing
privatisation programme, fuelled by low operating costs
and a young population.

Tourist hotspot
The Mother Teresa Airport upgrade reportedly increased
tourism by 22% in 2007 alone. Already popular among
Italians, Albania has recently attracted a lot of interest
from the British and worldwide press3 keen to find out
more about this undiscovered destination.

Timing
Albania is at the beginning of its property cycle. It has
yet to be marketed heavily on the international scene, a
factor which traditionally boosts prices. Developers are
snapping up land across the country and, as competition
increases, the prices of finished units should be pushed up
dramatically. Getting into a market at the right time gives
investors the opportunity to maximise profit margins from
the early boost in property prices as the market
gains exposure.

Village on hillside, Lake Ohrid region

1. http://search.ft.com/ftArticle?queryText=hydro%20berisha&y=0&aje=true&x=0&id=070816010426&ct=0
2. http://www.worldbank.org.al/WBSITE/EXTERNAL/COUNTRIES/ECAEXT/ALBANIAEXTN/0,,menuPK:301421~pagePK:141132~piPK:141107~theSitePK:301412,00.html
3 http://www.guardian.co.uk/travel/2007/aug/11/saturday.albania

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Political overview
Today, Albania is classed as an emerging democracy Albania has signed the Stabilisation
and terrific strides are being taken towards a stable and
open political system. In the 2005 general elections, and Association Agreement with the
the Democratic Party and its allies won by promising view to joining the European Union
to reduce crime and corruption, to promote economic
growth, and decrease the size of government1. by 2014.
The second-largest parliamentary group, the Socialist
Party, returned to opposition after eight years in power.
In what was the second highest voter turnout in all
worldwide democratic elections that year, the election,
and particularly the orderly transition of power, was
considered an important step forward in the country’s
political development and stability.

In this new era for Albania, the communist regime

associated with Enver Hoxha, which governed the country
for the best part of 50 years after WWII, is firmly in the
country’s past2.

The modern political system is based on a constitution

passed in 1998. Parliamentary elections are held every
four years, while the head of state (the President) is
elected every five years by parliament. The current
President is Bamir Topi, who took up his position in July
2007. Inside Albania’s government building

Currently the government is working hard to instigate a

series of reforms designed to attract increased levels of
foreign investment and reduce the grey economy, which is
thought to be as much as 50% of annual GDP. The policies
appear to be working, with more than 1,000 foreign
companies now operating in Albania including a growing
list of international banks - a sure sign of confidence
in the government’s policies and indeed the country’s
financial sector.

Albania’s standing in the international political arena is

set to be further enhanced should it achieve membership
of NATO in July 2008. The country has also signed the President Bamir Topi, elected July 2007

Stabilisation and Association Agreement with European

Union, which has already committed €495 million3 from
2001 to assist Albania’s accession plans. There is strong
reason to believe the country will join the EU in 2014 as
planned, bringing with it more security and growth.

1. http://www.cia.gov/library/publications/the-world-factbook/geos/al.html
2. Mediterranean Europe (Lonely Planet Publications)
3. http://ec.europa.eu/enlargement/how-does-it-work/financial-assistance/cards/bilateral_cooperation/albania_en.htm

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Economic overview
Fifteen years ago Albania introduced a series of economic Tax
reforms similar to those of other newly democratic State property tax: NONE
countries of central and Eastern Europe. VAT: NONE
Capital gains tax: NONE
The interim years have seen the economy make progress, Rental tax: 10% of rental income
but there have been definite setbacks along the way. Most
Withholding tax: NONE
notably, the collapse of pyramid investment schemes
Inheritance tax: NONE
in 1997 threw the country into crisis as 70% of the
population lost their life savings and violent riots broke Stamp duty: 3% (paid by the seller)
out. Since then the reforms have slowly started to prove
a success.

Since 2002 GDP has increased by 5% a year – driven

by the growth of the construction and tourist industries
– and now stands at US$9.1 billion1. Inflation is low and
stable at 2.4% and foreign investment is at an all time
high reaching US$2.1 billion in 2006. The economy is
bolstered by nearly US$1 billion2 a year sent back by
Albanians living abroad.

But challenges remain. The construction of a new thermal

power plant in the southern Albanian town of Vlora
will help relieve energy shortages3. The government is
also moving to improve the national road network with
a US$56 million Transport Project loan4. The current
government is also committed to stamping out corruption
and organised crime, both hot issues for NATO and
EU membership.

Albania’s economic fundamentals are strong and there is

great potential for further progress and wealth generation
– exactly the sort of conditions that lead to good long-
term investment opportunities.

The mountainous backdrop of Shkodra in northern Albania.

1. http://devdata.worldbank.org/external/CPProfile.asp?PTYPE=CP&CCODE=ALB
2. http://www.economist.com/world/europe/displaystory.cfm?story_id=9657129
3. http://go.worldbank.org/UFB7TEVF60
4. http://web.worldbank.org/external/projects/main?Projectid=P078949&Type=Overview&theSitePK=40941&pagePK=64283627&menuPK=64282134&piPK=64290415

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FAQs
Owning residential real estate in Albania is easier than ever, thanks to the
latest property ownership provisions and access to our dedicated
English-speaking lawyers.
Q: Are there restrictions to foreign ownership? Q: Do I have to pay capital gains tax on resale of
A: No. Restrictions pertain to agricultural land only. my property?
A: No. There is no capital gains tax in the case of
Q: Do I need to create a company to buy property personal ownership.
in Albania?
A: Unlike Montenegro or Romania there is no need to Q: Do I have to pay a tax on rent?
create a local company. You need only create a A: An income tax of 10% is due on the amount of the rent.
company if you intend to purchase land or to undertake
commercial activity. Q: Do I have to pay wealth tax?
A: No. There is no wealth tax in Albania.
Q: Is co-ownership allowed in Albania?
A: Yes. A co-ownership is an arrangement whereby two or Q: Can capital and/or profits be repatriated without
more persons buy a property together and wish to difficulty by a non-resident?
provide for leaving their share (when they die) to A: There is no withholding tax in Albania. Capital and
someone other than the other co-owners. profits can be repatriated once you have paid the
legally due taxes.
Q: Do I need a lawyer to buy a property in Albania?
A: Yes. Please see one of our deal brochures for full Q: What is the level of inheritance/gift taxes
details of the independent lawyers we recommend. in Albania?
A: There is no inheritance tax and gift tax is just 3%.
Q: What is the cost of the Public Notary?
A: 1% of the purchase price. Q: What happens if the builder defaults?
A: The builder either raises finance from a bank or
Q: What are the other costs linked to a the bank guarantees the mortgages of the prospective
property purchase? buyers. Nonetheless the bank will request a
A: Title application fee = €200 performance bond from the builder to ensure that in
Insurance (approx.) = €100 the event of the developer default, funds are available
Maintenance (approx.) = €3-5 per m2 to finish the construction. Furthermore the quality and
Our recommended lawyers’ fees = €650 incl VAT financial standing of the builders is always thoroughly
checked. All companies involved in the construction are
Q: Do you offer property management services? members of, and regulated by, the Albanian Chamber
A: No. Ready2invest does not offer a property of Builders. These companies are medium to large in
management service, but we can recommend some. size with a good track record of providing quality work,
delivered in realistic timescales.
Q: Do I have to pay state or local taxes on
my property?
A: No. There is no state tax on real estate.

Q: Do I have to pay VAT on land, apartment and/or any

property purchase?
A: No. The sale of buildings and land is not subject to VAT.

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