Factors task two | Business & Finance homework help

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5 February 2008

A combination of political, economic, legal, cultural and geographic factors make Albania “the next big thing” when it comes to international real estate investment, a British real estate investment company announced.

It its report, the company drew an extremely favourable picture of the future of real estate investment in the country, which is currently Europe’s least developed and, despite positive developments, still suffers from a poor to non-existent infrastructure, including its road and electricity networks.

Albania follows in the steps of other destinations on the Balkans that experienced big property investment booms, such as Montenegro and Bulgaria. “Recently Albania has put itself firmly on the map, both as an increasingly popular tourism destination, and an emerging market on the international property investment scene,” according to a press release by David Stanley Redfern Ltd, a British overseas property investment company.

Political problems prevented the issuing of construction permits for a period of two years were only resolved at the end of last year. The effect of this was two-fold: on the one hand, it caused stagnation on the property market, but on the other it resulted in a rapid property price increase, creating a kind of a jackpot effect that can currently be observed.

Beside this development, a number of other factors contributed to the popularisation of Albania as a new property investment destination. Some of them are political: Albania is set to join NATO later this year and the EU in 2014, as a result of “huge advances in democracy.”

Economically, Albania has experienced a 6 per cent GDP growth which is likely to accelerate, while at the same time retaining relatively low living costs.

Foreign investment in Albanian real estate is also facilitated by the country’s legal framework. The few restrictions on foreign ownership that are in place make it relatively easy for 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.

International buyers can also benefit from the low transaction costs and Albania’s tax advantages: there is no capital gains tax, no withholding tax, no inheritance tax, no Value Added Tax on property purchases, no state or wealth taxes and no transfer tax. Capital appreciation can reach up to 30 per cent, according to the company, depending on the investment.

Lastly, the cultural and geographical factors that serve to draw foreign investment into many Balkan destinations also apply to Albania. The publication mentioned the country’s largely undiscovered history and its climate as major advantages.”

Your task: Now have a look at the previous article about expanding into the real estate market in Albania.

Identify the key political, economic and geographic factors that are identified here when encouraging real estate businesses to expand into this area.

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