Ever since the first case of COVID-19 in Malta, many businesses have been at risk. Many investors shocked. Some people lost their jobs, some tenants got a breath of fresh air with their rent, the ones that didn’t ignored it for a month but come end April things started to change.
Tenants began to scramble to websites for better deals, new listings. A lot of new listings. Where were they all coming from? What exactly is going on in the long-let industry at this exact time? Here’s my opinion for what it’s worth.
The health authority’s recommendation for self-isolation and increased advice to stay home was responded to very swiftly and seriously. As the days went by, the scale of this pandemic became clearer; this was not going to go away in a couple of weeks. Families and friends, although further apart, came closer through the use of video calls and new apps to keep each other entertained. People spent a lot of time fixing up their outdoor spaces, be it balconies, yards, roofs or gardens.
While, of course, most businesses grinded to a complete halt in the month of March, many companies mobilised as quickly as possible to be able to work remotely and offer their services safely to their customers.
QuickLets and Zanzi Homes have always been a PropTech-focused company, hence most of our system was already mobilised for remote working and 3D virtual viewings.
While all our people stayed home, we quickly realised we needed to pick up the phone and understand the behaviour of the market. The problem was that everyone, including estate agents, were in shock. Today, it is evidently clear what is happening.
Unless listings prices drop by 20 to 30 per cent, the majority of properties will not be rented out and will remain empty until 2021
The long-let industry is experiencing a massive, but temporary, oversupply. The Airbnb website has some 9,000 short let listings in Malta. With the travel restrictions and the airport closed, there is little hope that the industry will pick up again this year. Ryanair published that 40 per cent of its flights will return in July. I am confident this will happen; however, the issue still remains whether people will be comfortable travelling and staying in private short-let apartments. Let’s not forget that hotels will probably have discounted rates too.
Would the short-let model still be as attractive with reduced prices or will property owners shy away from the hassle of check-ins and check-outs, considering the reward is not as great as it was? My take is most will remain in the long let till at least next summer.
For the first time since our inception back in 2013, we have close to 7,000 properties available for long let under the price of €1,500 per month and 4,500 properties available under the price of €1,000 per month. During the months of May, June, July and August, we used to turn down clients with budgets of under €1,000 per month for the simple reason there used to be absolutely nothing available.
What are likely to be the busiest months in the long-let industry used to be the worst for the simple reason that long-let properties used to be turned into short-let residences for the tourism industry.
Today, landlords are faced with a decision they have to make: reduce the price and enter a 12-month agreement under the new rent law or else sit tight in anticipation that the short-let industry revives in July and they can capitalise on this for at least half the season. The only issue is that if they decide to rent now, prices have decreased by approximately 20 per cent. For properties which were higher priced, we are even seeing a decrease of 50 per cent for a quick rent.
The fact is, that although supply has increased overnight and keeps on increasing and property owners see their assets empty and have to further decrease the price to find a tenant, the demand has also increased.
With expats needing to return home, companies consolidating and not recruiting from overseas, people losing their jobs or suffering a reduction, essentially the only potential clients are the ones already renting and the locals.
The ones already renting will only move for a better deal, either because their income dropped or because they want to save some extra cash. The other potential demand comes from the locals ‒ Maltese that want to move out of their family home.
This is the reality of the market. Unless listings prices drop by 20 to 30 per cent, the majority of properties will not be rented out and will remain empty until 2021.
For us, it’s also not good news as our expenses are the same, our agency fees are the same, the work is the same. We would also suffer an income drop of 20 to 30 per cent. That’s my opinion for what it’s worth.
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Steve Mercieca, Co-founder and CEO of QuickLets and Zanzi Homes
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