Construction activity and real estate market trend: evidence from Albania

PurposeThe aim is to identify the main macro-economic drivers of construction in an Eastern European country that is experiencing significant changes in the real estate sector.Design/methodology/approachUsing a proprietary database provided by Bank of Albania, the paper evaluate the relationship between macro-economic determinants and a set of macro-economic drivers using the granger causality test and the impulse response function.FindingsResults show that in Albania, as in other new developed economies, the credit market and the amounts of remittances are the main sources of construction changes. Real estate sector characteristics are more relevant in explaining the construction development in the short and in the long run.Research limitationsThe paper is based only on a detailed dataset on the Albanian economy but results cannot be generalized for all Eastern European countries.Practical implicationsResults obtained are useful for policy market and macro-economists interested to evaluate the dynamics of the construction sector and evaluate the effect of any macro-economic change on the size and growth of the sectorOriginality/valueThe paper is the only one available for the Albanian market and the methodology adopted is never used before for any European country.