Construction costs rise in Albania despite easing in material prices

Albania’s construction sector is facing higher costs, particularly for wages and machinery, even as material prices show a slight decline. According to INSTAT, the Construction Cost Index for residential buildings reached 113.5 points in the second quarter of 2025, up 1.1% year-on-year, compared with 2.5% growth a year earlier.

Why is this important: The index is a key economic indicator, used in GDP calculations and for planning new construction projects. Rising labor and equipment costs highlight structural pressures in the sector, which continues to struggle with a shortage of skilled workers.

Context: Wage expenses increased by 6.2% in the second quarter, reflecting both high demand for labor and limited supply of qualified staff. Machinery costs rose by 2.2%, while other auxiliary services increased by 2.3%. Transport costs were also up by 1.4%.

By contrast, material prices fell by 0.7%. The largest drop was in electrical and communication materials (−1.8%), followed by building materials (−0.6%) and hydro-sanitary items (−0.4%). These declines have helped offset overall cost pressures but have not reversed the upward trend.

Quarter-on-quarter, the index rose by 0.4% compared with the first quarter of 2025, suggesting stabilization but no significant reduction in costs.

What else: The slowdown in the annual growth rate — from 2.5% in the second quarter of 2024 to 1.1% in 2025 — shows some moderation, but the sector remains under pressure. Persistent labor shortages and rising service costs could weigh on investment and profitability, despite some relief from cheaper materials.

Next steps: Analysts expect the government and industry to focus on workforce development and efficiency gains to contain rising costs. The Construction Cost Index will remain a closely watched indicator for assessing project feasibility and economic performance.