Concerns that Malta’s property market growth is slowing down were confirmed in a new study last week. Ivan Martin takes a look at some of the findings from a new report by accountancy firm KPMG.

Developers and real estate agents consulted for the Construction Industry and Property Market Report 2019 gave a rare glimpse into how they truly feel about the property market today. 

The report, commissioned by the Malta Developers Association, once again dispels fears that a property bubble was imminent but encourages stakeholders to be “prudent”.

Here’s a look at some of the salient points in the document. 

Will high-end properties sell?

Many operators who spoke to the study team questioned the feasibility of high-end luxury developments, especially in the face of challenges facing the upper end market today. 

The quality and standards of projects delivered so far would struggle to meet the expectations of international buyers who are cross-shopping in a number of global destinations, they warned. 

High-end buyers would weigh the attractiveness of Malta as a jurisdiction against other destinations.

Developers behind some of these high-end projects shared a few of these concerns, particularly when it came to the finished product not meeting investors’ expectations. 

They also agreed that Malta as a destination needed to become more attractive for high net worth investors. However, they were also confident about the prospects of their own projects.

Meanwhile, developers behind high-end projects also raised concerns over speculative demand, with buyers placing deposits on properties expecting a high return on their investment.

This, they said, was “risky”, as an economic downturn could hit them hard.  

Others, however, argue that scarcity of land and the resilience of the upper-end market gave investors an element of security.

A return to bartering?

According to the report, while swapping properties was still relatively uncommon, the practice may have made a slight resurgence in recent months.

Some operators said they expected the practice of swapping properties to increase in the possible event that cash flow within the industry becomes tighter. 

Are prices affordable? 

Seasoned developers told the study that they had actually turned down a number of desirable plots of land in recent months as the asking price was so high that it would have been impossible for them to turn a profit. 

Many operators pointed out that increased speculation was pushing land prices beyond feasible levels. 

Finished product not meeting expectations

Increased wages for workers was the main cause of growing construction costs, while dumping costs were also cited as a major contributing factor, having grown significantly in recent years due to a shortage of dumping sites. 

Despite these increasing costs, most operators said prices for finished properties had now started to “stabilise”.

Some estate agents actually cited drops in prices in certain localities.

This was welcomed by some operators who said a slowdown would give time for wages to catch up with the current pricing levels and restore affordability to a market that had spiralled upwards.  

Other operators, meanwhile, were less optimistic about the implications of a slowdown, saying speculators who had already invested could run the risk of losing money once projects were completed. 

Banks admitted that first-time buyers were having a particularly tough time getting onto the property ladder. The same was true of low-income households who could not secure loans for habitable properties.

Back to a buyer’s market?

Operators told the study team that the market may “slowly” be moving away from a seller’s market. 

One operator said the difference between a property’s original asking price and the final negotiated price was growing. 

This, the report says, does not necessarily mean that buyers are negotiating larger discounts but simply shows that the final selling prices are lower than those originally advertised.

This could also be the result of sellers pushing up initial asking prices to chance a good sale on the market.

Maltese not eco-friendly

Local buyers do not value environmentally friendly measures, developers said. Energy-efficient solutions and other green measures were seen as expensive and unwarranted.

Foreign buyers, on the other hand, often sought out these features when searching on the market.

This tied into other comments from developers who admitted that their projects would not meet the normal standards in other European countries. 

They also complained that Energy Performance Certificates were simply regarded as “an administrative burden”.

The public needed to learn that EPCs were not just another “inconvenient expense” and to understand the value of having an energy efficient home.

More green spaces?

Developers said that shifting towards high-rise developments would help safeguard the few remaining green spaces in Malta.

Current planning laws, they said, meant that high-rise developments required a boundary at ground floor which could not be built up, “thereby allowing for more open spaces than seen with mid-rise developments”.   

All operators who shared this view admitted that it would only work if it was done in a sustainable and well-planned manner. 

Conservationists’ suggestions were welcomed but these had to be grounded in reality, developers said.

They said that while they acknowledged the concerns over green open spaces, halting the construction sector was not a realistic option.