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The difference between investment in existing buildings and development projects

The real estate market in Albania has been booming in recent years and is becoming an increasingly attractive option for investors looking for stable returns and capital growth. In this article, we will look at what makes Albania a lucrative property investment destination and what the return potential is, looking at the comparison between existing development and new development projects.

Deciding to invest in real estate abroad requires careful consideration of various factors. In this context, we will deal with two main approaches: investment in existing, older buildings and in newly emerging development projects. Both of these options have their benefits and challenges, and we'll look at some of them.

Investment in real estate in Existing Development:

When considering buying a property in one of the larger coastal cities in Albania, there are a few basic facts to be aware of. Many apartments currently offered on the real estate market in Albania are located in apartment buildings that were built in the 1990s. During this time, the country witnessed significant social, economic and political changes that impacted on infrastructure and building standards. Many buildings from this period were built in a hurry and with limited resources. This results in lower quality standards, whether it is thermal or sound insulation, electricity distribution, or materials used.

Another important aspect that plays a role in the acquisition of real estate in an older development is the fact that in 2019 the country was hit by one of the strongest earthquakes, which caused a number of significant damages and a significant impact on the statics of the buildings. While these buildings may appear attractive in terms of price, they carry the risk of structural damage in the event of further strong tremors. This means that investors could face the need to invest in renovations and structural strengthening of entire buildings to ensure the safety of their investment. As a result of this earthquake in 2019, the real estate market in Albania was in trouble and prices were plummeting at the time. But the earthquake also sparked a discussion about building standards and regulations, resulting in increased oversight and efforts to improve the quality of buildings in the future.

Investors should also consider that the appreciation of existing properties may decline in the future. Older buildings often do not have sufficient infrastructure for the increased number of residents, which can lead to increasingly frequent problems with water and electricity supplies in the high season.

Considering an investment in an existing development requires a careful assessment of the costs of modernization and the risks associated with the future value of the property. There is potential for returns, but investors should have a realistic idea of the quality of construction and the potential challenges that are or will be associated with acquiring this type of property.

Real estate investment in Development Projects:

Investing in new development projects in Albania has many advantages. Sufficient infrastructure and stricter standards are one of the main attractions of development projects. Development projects usually offer properties with modern design and equipment that meet European quality standards, greatly minimizing the need for extensive renovations or modifications in the near future. New buildings also have more efficient energy classes, thanks to which lower operation and maintenance costs can be expected. They are often created in strategically selected locations that have the potential for future development and real estate value growth. Investors can therefore benefit from the expected growth in tourist attractiveness and demand for modern and nice accommodation in the area.

Higher guarantees are also associated with new and emerging real estate. Development projects often include warranties on construction work and equipment, which can reduce the risk of unforeseen and additional costs.

On the other hand, investing in development projects also carries certain risks. One is construction delays, which can affect the payback period for rental income. Another factor may be price. New buildings are often more expensive than existing properties, however, from the point of view of appreciation, they are definitely a better choice.

The decision whether to invest in old real estate or in modern development projects in Albania depends on the individual goals of each investor. At Investment Albania, we carry out these analyzes constantly in order to always be able to identify attractive investments for us and our investors.

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