The stock of new residential properties is expected to exceed demand between next year and 2025, according to a report published on Thursday.

The report by accounting firm Grant Thornton and real estate agency Dhalia also shows that nowadays the average single buyer can afford less than two-thirds of the average €260,000 asking price of a finished property.  

Speaking at an event entitled The Malta Property Landscape: A True Picture, Grant Thornton consultant Daniel Gravino said Malta will increase its housing stock significantly over the next two to three years, which is expected to apply a downward pressure on house prices.  

“In my view, this is a good sign as it is a sign of market forces at work,” he said. 

The report’s authors estimate that between 2020 and last year, the number of additional, or ‘incremental’ housing units outstripped demand by around a quarter. 

According to the report, “26,000 housing units are estimated to have come onto the market between 2020 and 2022. This is significantly higher than the estimated incremental housing demand for the same period.”  

The authors based their supply figures on applications submitted to the Planning Authority, though emphasised that based on historical data, the time it takes for applications to translate to finished properties ranges from one to five years.  

Five per cent came onto the market within one year of applying for a permit, 70 per cent within two years, 15 per cent within three years and 10 per cent over the fourt and fifth years, they said.

Speaking to Times of Malta after the event, Gravino stressed that the downward pressure mentioned in the report did not necessarily equate to a reduction in house prices.  

“It could be that they stay at the same level or go down by a small amount. I’m not saying prices are going to drop, but there will be a downward pressure... [the reduction] might be at a very low level as opposed to what we saw in the past,” Gravino said.  

9,500 new housing units approved

In 2022, the Planning Authority approved applications for 9,523 new housing units. While “relatively high,” this was less than the “historically high” number approved in 2018 and 2019, the report noted.  

“Activity in the residential property market remains high,” the authors wrote, citing a similar number of final deeds of sale last year (14,331) when compared to 2021.  

“This heightened activity and generally high prices [at the present] continue to raise concerns about housing affordability,” they said, noting that in the first quarter of this year, despite declining by 2.9%, the Selling House Price Index was still almost 10% higher than the average in 2019.  

While the high number of available properties is expected to apply pressure for lower prices, in the short-term, properties remain expensive, with the average-earning single buyer squeezed out of the market.  

"The maximum affordable house price for a one-adult household amounts to only 61.7% of the average price of a finished property,” it said. This is equivalent to around €160,000.

Those on lower incomes remain the most hard-hit by high prices, with the report estimating that a two-adult household where both earn the minimum wage would only be able to afford a house worth around €145,000.  

Dhalia CEO Alan Grima said the generally high prices meant there was a “very strong concern” for the situation facing first-time buyers and noted that the average age for those buying property had risen to around 30.  

Panel discussion at the Grant Thornton and Dhalia event on Thursday.

Eco-friendly housing 

Some relief may be found by choosing properties that are more environmentally friendly, however. 

Thursday’s presentation showed that opting to purchase a sustainable one-bedroom apartment for €200,000 could yield financial benefits amounting to €19,194 in five years, and €43,737 over 30 years.

Speaking at the event, Planning Minister Stefan Zrinzo Azzopardi said the economic feasibility of future housing projects would depend on the amount of investment put into energy efficiency and would require “behavioural changes” on the part of developers and contractors. 

"It is pointless to talk about more energy-efficient buildings if we do not have the necessary skills on-site,” he said.  

The government is also working to improve standards in the sector and there are plans to introduce mandatory licensing of contractors.  

Last month, the government announced a plan to license contractors after dragging its heels on the issue for more than three years. Regulation of the industry was first promised by former infrastructure minister Ian Borg in 2019.

The head of advisory at Grant Thornton, George Vella, said he believed that more resources were needed for “better and smarter regulation,” but that self-regulation was also important.  

“One of the things that really irks me is that developers aren’t going for self-regulation,” he said.  

“Self-regulation is one of the most effective ways of how to go about these changes... unfortunately, instead of going for self-regulation and allowing businessmen to lead, we’re asking the government to lead the way."

There have been increasing calls for government regulation of the building industry in the wake of several tragedies occurring due to unsafe work on construction sites.

Earlier in April, the parents of Jean Paul Sofia, who was killed in a building collapse last December, blamed their son's death on inaction by state entities as well as those responsible for the construction site’s development.