The housing market faces a "challenging" future as property prices are now double what they were in 2013, a new report has found.
It also shows young couples can only afford apartments that are around 115 square metres, while single individuals are likely to struggle to afford to purchase property with the current prices.
Carried out by Grant Thornton in collaboration with Dhalia, the report shows that "house prices increased by 100 per cent".
"This means that, on average, a property that sold for €100,000 in 2013 H1 would have been selling at €200,000 in 2022 H1. This represents a significant increase in house prices that coincided with fast economic growth and a strong influx of foreign workers," the report states.
The study also found that the greatest rate of growth occurred between 2016 and 2019, when house prices increased the most.
A marginal dip was recorded at the end of 2019 and in early 2020, with the report pointing to the "uncertainty caused by the political turmoil" at the end of 2019 and the COVID-19 pandemic at the beginning of the following year.
Rental prices up 42%
Similarly, the rental price of housing units also increased over the nine-year period between 2013 and 2022, going up by some 42%, the study shows.
"The rental price index shows that a housing unit that rented for €500 per month in 2013 H1 would have been renting for €710 per month in 2022 H1. This represents a significant increase."
Like property buying, 2020 saw a dip in the rental prices, dropping by some 16% by the second half of the year when compared to the latter part of 2019.
The report states: "This decline in rental prices has been caused by a temporary decrease in demand (or tenants’ ability to pay) and an increase in supply of rented housing.
"The decrease in demand is a direct consequence of the negative impact that COVID-19 has had on many sectors of the Maltese economy, particularly those that are foreign-labour intensive."
Supply and demand issues
The study also predicts that the housing market could expect "further downward pressure on prices" as a result of supply outweighing demand.
Between 2010 and 2019, additional demand for housing units increased rapidly, the report states, largely reflecting demand from the increasing number of foreigners based in Malta.
In 2020, however, "incremental user demand turned negative as short-stay tourists’ contribution outweighed additional demand from first-time buyers".
The demand was once again positive in 2021 but the "significant additions" to the housing supply stock in the coming years could once again reverse this trend.
According to the study, 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. The situation is complicated by international developments that have impacted the global economy. In particular, the cost of raw materials used in construction soared.
"The future for the housing market is challenging."
Meanwhile, the study also found that young people, on average, only afford to purchase a 115 square metre apartment, and this only after taking a 35-year loan.
For a single person, their "maximum affordable house price falls significantly short of prevailing market prices", the report states.
"Since first-time buyers constitute an important source of housing demand, these considerations are important in forming expectations about future developments in the Maltese housing market," the report says.
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