The Bank of Albania is developing measures to limit the excessive growth of lending in the real estate sector, caused by speculative transactions and available borrowed funds. The regulator is introducing a number of restrictions aimed at reducing financial risks and stabilizing the housing market.
Among the main proposed measures is the setting of lending limits in terms of collateral. The Central Bank plans to set the maximum allowable ratio of the loan to the value of the collateral (LTV). This should prevent situations in which banks finance the purchase of real estate almost entirely, as is currently the case (in some cases up to 100% of the property value).
Control is being introduced over the debt burden of borrowers. The level of debt (DTI - debt to income) is being limited, as well as the share of monthly payments in the borrower's income. This will help avoid an excessive credit burden on the population.
Lending terms are being reduced. The maximum term of mortgage loans may be limited to 30 years, which will reduce long-term risks for the banking system.
Strict requirements are being introduced for investment real estate. Buying a second or subsequent home for investment purposes may be associated with additional conditions, including higher interest rates or a mandatory increased down payment.
Currently, almost 46% of all loans granted in Albania are secured by real estate. Over the past year, this figure has increased by 9%, which indicates the high dependence of the banking sector on the housing market.
At the same time, many bankers grant mortgages that cover 70-100% of the property value, which creates risks in the event of a sharp drop in prices or an increase in overdue debts.
Detailed statistics on average property prices in Bulgaria by city and neighborhood can be seen HERE