The recovery of the Malta property market

There are few subjects that stimulate more emotional discussions among the Maltese than the movements in house prices. Everyone seems to have an opinion on whether the price of the Malta property is going up, down, or is simply flat.

Statistics published by the Central Bank confirm that advertised house prices have actually gone up by 4.5 per cent in the first quarter of this year. Some time earlier, the National Statistics Office confirmed that, in the same period, actual sale prices rose by 0.38 per cent. Even this more modest increase seems to confirm that the two-year fall in property prices is being reversed.

There are some who find these statistics difficult to digest as there is significant anecdotal evidence that the property market is still in the doldrums and that few sales are being concluded as sellers fail to receive the kind of offers acceptable to them. Understanding what may really be happening in the Malta property market may therefore be more complex than just looking at official statistics.

One of the limiting factors of the Central Bank statistics is the fact that they are based on advertised property prices. Buying and selling property often involves a lengthy bargaining process where the final agreed sale price may be quite different from the original asking price. Unfortunately, there are hardly any other property indices that one may use to countercheck the indications shown by both the Central Bank and NSO statistics. Some estate agents are known to compile such indices but they are not published.

Anecdotal evidence should not be thrown out of the window simply on the grounds of being “unscientific”. The sight of houses marked “for sale” is common in most parts of the island. Some of these properties have been advertised for sale for over a year. There are estimates that indicate that up to 50,000 properties are unoccupied. Even if not all of these properties may be available for sale, it certainly represents an overhang of supply that can only depress prices until demand rises significantly. With banks tightening on mortgage lending conditions, it is unlikely that there will be a surge in demand any time soon.

The fact that permits issued by the Malta Environment and Planning Authority for new developments has dropped by 40 per cent in the first quarter of this year is also significant. It may indicate that developers are not seeing much chance of demand building up and may not want to risk ending up with property that could be difficult to sell at prices giving them a healthy return.

The liquidity of the Malta property market is often given little importance in discussion on where it is heading. When one invests in property, or any other asset, for that matter, one has to consider the ease of disposing of it in a reasonable time and without major fluctuations in price.

It is an acknowledged fact that those who want to sell their property, but are not desperate to do so because they have no mortgages to repay, may decide to hold back from selling if the price offered does not match their expectations. This avoids significant drops in property prices but also limits liquidity, a major drawback in a small market.

While the upward trend in property prices indicated by the Central Bank and NSO is most welcome, it may be too early to declare that the property market is on the way to a healthy recovery.

It is always recommended to use a reputable Malta real estate agent when planning to relocate to Malta and buy property in Malta.

Article supplied by timesofmalta.com