The discrepancy between the number of promise-of-sale agreements and actual property sales is the result of excessive bureaucracy in development processes, according to Malta Developers’ Association president Michael Stivala.

He was reacting to recent NSO data showing that, while property sales were down by 18 per cent in April, promise-of-sale agreements increased by four per cent during the same period.

Many people are left in limbo- Malta Developers Association head Michael Stivala

Stivala told Times of Malta that the majority of promise-of-sale agreements are being signed for properties that are yet to be built, with a lack of supply of existing properties driving people to buy properties on plan.

The excessive bureaucracy required by agencies such as the Building and Construction Authority is lengthening the period required for permits to be issued and properties to be built, with promise-of-sale agreements often being extended multiple times to cater for this delay, according to Stivala.

“This is leading to a situation where many people are left in limbo, having signed a promise-of-sale agreement but waiting for their property to be built”, he said.

Stivala’s comments were echoed by QuickLets and Zanzi Homes founder Steve Mercieca, who argued that several factors, such as delays in banks issuing loans as well as construction delays, are forcing buyers to extend promise-of-sale agreements repeatedly.

According to Mercieca, just over one in 10 promise-of-sale agreements fall through and do not ultimately result in a sale.

Mercieca was keen to point out that property agents only account for a third of all property sales, with the vast majority of all deals being carried out directly by the developer or property owner.

One-bedroom apartments

Mercieca also believes there is a mismatch between what the property market is offering and what prospective buyers or tenants are looking for, with the problem being particularly evident in the rental market.

“The majority of rental properties are rented by expats, high-earning foreign tenants who are looking to rent a one-bedroom apartment but are unable to find any because we don’t build them,” he said, arguing that, though one-bedroom apartments are customary in many other European cities,

Maltese planning regulations discourage developers from building smaller apartments.

Declining numbers

The performance of the property sector has been under the spotlight in these last months, with a recent KPMG report expressing concern over a drop in the number of promise-of-sale agreements throughout 2022.

A recent Times of Malta fact-check found that property sales are experiencing a slight decline according to national data, with the number of promise-of-sale agreements also being lower than in several previous years.

NSO data also shows that the number of newly approved permits for residential dwellings was much lower in the first three months of 2023 when compared to the same period last year. However, the number of permits issued and dwellings approved remained higher than in the previous quarter.