A new report from the financial services firm Grant Thornton Malta in conjunction with the real estate agency ,Dhalia in Malta, give an insightful study of the Maltese property market.
The study shows that property prices in Malta have doubled from 2013 to date, with the fastest growth recorded in the five years leading up to 2019.
A house that would have sold for €100,000 in 2013 would now sell at €200,000
Statistics Malta have seen an increase in the level of activity within the property market in 2021 and that 79% of Maltese are now homeowners.
You may think that this upward movement in the selling prices is an isolated event, Malta’s house prices have been on a near constant upward trajectory since the late 1980s
The Rental Price Index shows that a housing unit that rented for €500 per month in 2013H1 would have been renting for €710 per month in 2022H1. This represents a significant increase of 42 percent over a 9 year period.
From 2016 onwards, when the number of foreign nationals, thinking of Malta as a temporary place of residence, would rather rent than buy. In fact, the Central Bank of Malta(CBM) reports that the average length of stay of foreign workers in Malta is only three and a half years. Thus, as the foreign population grew to around 100,000 by 2019, the demand for rented housing units increased. And because housing supply typically lags demand, the fast-increasing number of foreigners pushed rental prices upwards; particularly in those areas where there is a strong concentration of immigrants, such as Sliema, St. Julian’s, Msida, Gżira, Marsascala, Qawra, and others.
What to expect going forward
Property purchase
The first half of 2022 saw most world economies have significant inflation growth, resulting in increases in the price of various goods and services. Malta was not immune to such inflationary pressures and saw consumer prices jump from an average annual rate of 0.7 percent last year, to an annual rate of 6.8 percent in July 2022
Inflation brings with it many challenges in the construction industry. Machinery and building material will see higher charges. Project based construction, where prices are agreed before commencement of work, will have to factor in prices movements several months in advance. Property developers who sold off plan may find it difficult to finish projects within the original cost budget in the current environment.
The quoted cost to build has increased by 30 to 40 percent, which amounts to an average of € 10,000 to € 15,000 per apartment. Michael Stivala, President of the Malta Developers Association (MDA), commissioned KPMG to prepare The Construction Industry and Property Market Report 2022, where it was estimated that the price of a median apartment in 2021 at €249,000. Factoring in the quoted increase in building costs, would translate into an increase in asking property prices ranging between 4.0 and 6.0 percent. A decrease in buyer affordability
Significant housing units are expected to come on the market between 2021 and 2023, estimated using data on new permits for housing units issued by the PA. depends on the number of permits issued around 1-2 years before. With a large number of such permits issued in recent years – amounting to almost 20,000 in 2018 and 2019 alone.
This additional supply outstripped additional demand in 2020 and 2021 – a reversal of what was observed in previous years. This is expected to put further downward pressure on house prices.
However, the situation is complicated by international developments that have impacted the global economy. A eurozone interest rate rise in response to high rates of inflation may put additional downward pressure on house prices as it translates into higher borrowing rates for both first time buyers and investors. The future for the housing market is that further downward pressure can be expected.
Rentals
Following a sustained period of growth in rental prices, came a steep fall.In 2020, the majority of properties were renting for anything between 5% and 30% less than in the previous year. The decrease in rentals, was caused by the temporary decrease in demand, as a direct consequence of the negative impact that COVID-19 ,particularly those that are foreign-labour intensive. Several reports in the local media say some 4,000+ foreign workers being repatriated abroad after losing their jobs due to COVID-19.
Also during the same period the number of tourists plummeted, many landlords shifted their property from short-term (holiday ) rentals to the long-term rental market.
By 2021H2, rental rates started to recover but, on average, remained around 10% lower than the pre- COVID-19 rental prices. This reflects increased activity in the tourism sector, recovering income levels and further growth in Malta’s foreign-born population which reached 120,000 in 2021.
Going forward gross rental yields are expected to be as follows:
4.7% Fontana, Għajnsielem, Għammar, Il-Munxar, Il-Qala, In-Nadur, Ir-Rabat, Ix-Xewkija, Iż-Żebbug, Kerċem, L- Għarb, L-Għasri, Marsalforn, Mġarr, San Lawrenz, Sannat, Santa Luċija, Xagħra, Xlendi
4.5% Buġibba, Mellieħa, Qawra, Salina, San Pawl il-Baħar, Xemxija
4.2% Attard, Balzan, Lija, l-Iklin, Birguma, Għargħur, Mosta, Naxxar, San Pawl tat-Tarġa
5% Cospicua, Kalkara, Senglea, Vittoriosa
5.6% Gżira, Msida, Pieta`, Ta’ Xbiex, Blata il-Bajda, Floriana, Gwardamangia, Ħamrun, Marsa, Valletta
5.3% Fgura, Raħal Ġdid, Santa Luċija, Ħal Tarxien, Xgħajra, Ħaż-Żabbar, Żejtun
4.2% Paceville, Sliema, San Ġiljan, The Gardens, Pembroke, Swieqi, Tal-Ibraġ, Baħar iċ-Ċagħaq, High Ridge, Madliena, Magħtab, Kappara, Mensija, San Ġwann, Ta’ Ġiorni
5.2% Luqa – Industrial, Tal-Ħandaq, Birkirkara, Fleur de Lys, Mrieħel, Mrieħel-Industrial, Qormi-Industrial, Santa Venera, Swatar
4.7% Qormi, Siġġiewi, Żebbuġ, Buskett, Dingli, Mdina, Mtarfa, Rabat
3.9% Għaxaq, Gudja, Kirkop, Luqa, Safi, Mqabba, Qrendi, Żurrieq
4.1%. Birżebbuġa, Marsascala, Marsaxlokk
Conclusion
The current market housing price in Malta and Gozo is considered to be “just sustainable” and will remain so as long as disposable income and prices are stable or grow equally, according to a study published by Grant Thorton and Dhalia on Malta’s property.
Original articles: https://bit.ly/3Sm0wYi
https://www.grantthornton.com.mt/form-malta-property-landscape-report/
