The pandemic has affected various economic sectors in different ways. Some recent indications suggest that the property market has not been as severely hit as other sectors, such as catering, entertainment and accommodation establishments.
An Ernst and Young property report has found that, in 2020, the prices of properties fell marginally, with the higher-valued houses suffering the most significant drops. This research is based on a database of advertised prices for different types of properties in various areas of Malta.
The Malta Developers’ Association has also expressed satisfaction because, in 2020, €3 billion worth of properties were sold, matching the previous year’s turnover. Still, the developers’ lobby wants the government to retain the fiscal incentives for property buyers for the foreseeable future.
There are risks linked to an analysis of the state of the property market that relies solely on the current property indices or on the marketing hype of estate agents. Full transparency is not one of the strengths of the local property market.
Publicly available property indices are either based on the prices of advertised property for sale or on the amounts recorded in public contracts. The amounts that actually change hands in property deals is quite another matter.
An intuitive analysis is likely to give a better understanding of how the property market is evolving. For instance, the fact that job losses resulting from the pandemic have not been significant implies that demand for property, especially from first-time buyers, has still been substantial. That explains why, at the lower end of the market, demand is still strong.
The low interest rates paid by banks has undoubtedly induced many to shift their investments from bank deposits to property, partially also as a result of banks encouraging buy-to-let loans. The country remains rich in monetary liquidity.
The flow of significant numbers of foreign workers in the last few years must undoubtedly justify this investment switch. But the demand for rented property has certainly been affected by the pandemic.
Thousands of foreign workers have left Malta and returned to their country. They may never come back. Some will work remotely. The minister of finance has also signalled a revision of the labour policy that had once promoted the recruitment of foreign workers. This change of policy is likely to make the buy-to-let investments less popular.
Besides the aspect of growth, the property market needs to address fundamental weaknesses if it is to improve its tarnished image. The current management of the urban and rural development is not fit for purpose. Town and village centres are being ruined by excessive development that destroys the natural charm of our landscape. The rapaciousness that has characterised some of the construction industry in Malta has started to spread to Gozo.
Low standards continue to fail the community. Insufficient attention is paid to the health and safety of construction workers and neighbours living next to building sites. The quality of both design and workmanship of new buildings often falls short of acceptable international standards despite the marketing hype of developers and estate agents.
Over-reliance on property development is not a new phenomenon. Every administration knows that construction projects have a robust cascading effect on the economy. This attitude ignores the negative impacts of overdevelopment – on people’s quality of life, on the fabric of traditional urban settings, on our ever-shrinking open spaces and on our fragile environment.
Those looking at the property market as an investment opportunity would do well to heed the Latin saying caveat emptor – let the buyer beware.