Promise-of-sale agreements were down 22 per cent last year, with consultancy and audit firm KPMG saying the drop is of “some concern”.
KPMG, part of the accountancy world’s big four, flagged the slowdown in property deals in a January economic outlook report for Malta.
A hike in rates will also make existing loans less affordable- KPMG
A total of 11,086 promise-of-sale agreements involving individual potential buyers were registered last year, down by 22% when compared to 2021.
KPMG said the drop was persistent across most months and spanned property deals involving both households and firms as potential buyers.
Last year, the number of final deeds involving households as buyers fell by 1.6% but the value of the properties sold increased by 4.5%.
Rise in interest rates could hit costs
The property market could be in for further turbulence this year, with KPMG warning that any increase in interest rates for property loans would increase property costs and reduce the amount a potential buyer can borrow, resulting in a decrease in demand.
A hike in rates will also make existing loans less affordable, as the monthly repayments will also increase.
Maltese banks have yet to react to a series of interest rate hikes by the European Central Bank (ECB), being done in a bid to combat inflation.
Last October, the Bank of Valletta chairman said that, for the “foreseeable future”, the bank was not seeing a need to adjust its interest rates because it is funded by a strong liquidity position which does not make it dependent on ECB funding.
Asking prices up five per cent
On the property price front, KPMG said asking prices increased by 5.3% in the last quarter of 2022.
KPMG said that the average value of final deeds involving households as buyers grew at 7.3% yearly, from €152,778 in January 2018 to €203,384 as of December 2022.
A comprehensive study of property prices published by KPMG last year found that a standard Maltese family is being priced out of the market.
In monetary terms, that means such households could only afford to buy an apartment costing €201,000, while the median property costs €265,000. The study defined an average-priced apartment as a three-bedroom property without a view, located in either the central, southern or north-western regions.
It calculated median national income as being €16,858 a year.