Not enough supply? Malta’s real estate reality
“Not enough supply” seems to be the consensus among directors of companies in the real estate industry. Many residents of the Maltese islands have expressed a growing concern regarding the increasing property and rent prices, adding on to the pressure being caused by the also rising cost of living. Many are concerned that they may be priced out of the market, at which point the question is: What happens now?
The Malta Independent on Sunday reached out to a number of leaders in the real estate industry.
Steve Mercieca, CEO of Zanzi Homes, said that he does not foresee a drop in price for “modern, new buildings” but does expect a price correction for “older buildings which were built 20-30 years ago and have not had sufficient refurbishment”. Mercieca explained that at the moment these properties are being rented out for the same price as a newer property due to a lack of new properties in the supply chain to meet the present demand. He said that he believes there needs to be a market correction regarding older buildings.
Mercieca said that according to his statistics, the price of rent has risen by 19% compared to 2022. He confirmed that there is a growing trend at the moment for people to rent as flatmates or rent bedrooms rather than apartments.
Regarding speculation that there is an impending burst of the property bubble, the CEO of Zanzi Homes said that he disagrees with this speculation. “Until now the properties have gone up, not down, I don’t see any burst coming, definitely not. I definitely believe that we need to build more residential high rises and have sectioned off areas to build these high rises. One- or two-bedroom units, that’s what the market needs at the moment.”
On the topic of overpopulation with regards to rising property prices, Mercieca compared Malta to a major European city. He explained that these cities have been dealing with overpopulation for over 500 years, “and now it’s coming to Malta so there’s a lot of talk about it and a lot of people are upset about it but it is not a Malta problem, it is a Europe problem”. He added that this situation is driving up property prices: “The foreign workers are definitely pushing up the property prices, but I don’t believe there is enough property at the moment in long let to supply the market.”
He explained that in his opinion there needs to be a long-term plan for high-rise development in tandem with a long-term plan for the infrastructure of Malta, particularly emphasising public transport and garbage collection as well as promoting street artists by providing permits for people to be able to paint in certain areas. “There is a lot to be done on our end as a community. It’s not only developers and the Planning Authority that are responsible for our urban environments.” Many properties are being rented out via Airbnb; are all the landlords doing their bit to educate their tenants, especially with regard to garbage collection?
This newsroom also reached out to the CEO of Alliance Group Michael Bonello. When asked if he foresees a drop in property prices in the coming years, he said that he “can’t confirm, but it doesn’t seem likely there’s going to be a drop”, as it stands the prices have stabilised and the market is still very strong.
Bonello said that rent has increased over the past six months and that the problem in the market is a lack of supply. He said that when talking about rent, we’re talking about a foreign market. “The local market, the Maltese, are still purchasing.” He said that the way forward would be to create smaller residential units of 30-35 sq.m. one-bedroom studios, as people cannot afford what’s on the market today.
Regarding the speculation of the property burst, the CEO of Alliance Group said that when looking at what’s happening on the market, it doesn’t seem like there’s going to be a burst. He added that prices in the sales of property have increased following increases in construction and finishing prices. “Post-Covid, an apartment that would have been rented out at €900 per month, today has gone up to €1,100 or €1,200 – there has been a price increase.”
Asked about the overpopulation’s effect on the property market, he said: “It hurts the rent market for sure, because there’s a low stock available, but on the other hand we know Maltese love investing.” He added that post-Covid the buy-to-rent market has started again after having fizzled out during the pandemic, and that in the past year it has formed 20% of their business. He concluded by saying that the minute an apartment is ready, it’s rented out within hours.
Frank Salt Real Estate Board member and shareholder Douglas Salt said that in his opinion, there would not be a drop in property prices but rather a stabilisation – “remaining more or less the same for a while”. Regarding the increasing price of rent, he said: “The price of rent is going up but it’s not driven by locals, it’s driven by foreign workers.” He added that the price is going up because of availability, and once availability stabilises so will the prices. He confirmed that there is a growing trend of people renting as flatmates.
Douglas Salt does not agree with the speculation regarding the property bubble burst, and that people have been speculating about a burst for years. “The market always regulates itself.”
Salt said that there is a mismatch between what is being built and what people want when they are looking for a home. “Unfortunately what is being built is being built to squeeze as much as they can into a development. It’s not necessarily the size of configuration people would want as a permanent home, so we’re struggling to find decent accommodation in these cases.”
The Malta Independent on Sunday also contacted Francis Spiteri Paris, founder and managing director of Perry Estate Agents. On the topic of high property prices and whether he foresees a drop, he said: “It always has been a debate and it’s never materialised. Property keeps going up and has never gone down. We keep speculating but it’s just speculation, there is nothing tangible to go on.”
Regarding the price of rent, he said that it goes up according to demand and that the current demand is strong. He added that the rent market is a “foreign market” as they mostly rent to foreigners, not Maltese.
Asked for his thoughts on the property bubble speculation, he answered: “Anytime you enter an argument about property, there’s always a bubble to be popped. There’s always a bubble – but it’s never happened. Unless there’s a huge crisis, but even during Covid nothing happened, in fact prices kept rising. Houses with gardens became more valuable, business was being done as normal. What is a crisis, and what is a bubble? Property is a tangible asset.”
On the topic of overpopulation’s impact on the property market, the Perry managing director said that he thinks it is an overpopulation of transient people rather than permanent. “Here today, gone tomorrow.” He said that while they may not significantly affect the property market, they perhaps have an impact on the letting market. “With regards to property resells, these are for people who want to take up residence here or want a quality holiday home. I don’t see it having much bearing on our market, but on the letting market? Yes.”
Kevin Buttigieg, chairman of RE/MAX, said that he understands that high property and renting prices are a major concern especially for younger people, but cannot see the prices going down due to the “huge building cost” involved.
He added: “I’m not going to say that in the future there’s not going to be a developer that will get into trouble and will sell properties at a cheaper price because he needs to cash in and pay the bank – that probably will happen. But on the whole, no, I don’t foresee property prices going down.”
Buttigieg said that what he does expect is a stabilisation in prices. “I cannot see the prices increasing by anywhere close to what happened over these last few years. I believe the prices will pretty much stay standard, especially at the low and middle end.” With that said though, he expects prices on the high end to keep going up due to a lack of supply to meet the demand.
Asked about the state of the rent market, he said it is a big mystery even with his experience of 29 years in the industry. “Where are all these people coming from?” He said that if someone wanted an apartment today, he likely would not be in a position to provide one unless it was at a “stupid, ridiculous price”. He referred to Sliema as an example and said that five to seven years ago, the price of a one-bedroom unit went from €600 a month to €1,100-1,300. “The rental market is tough, and it’s not just tough in Sliema or St Julian’s, don’t forget we only really had a rental market in these areas in the past along with St Paul’s Bay and Bugibba. Now the whole island is a rental area.”
On the speculation of the property bubble burst, he said that he cannot see it happening. “If property prices were to dip by 10% or stabilise, that is not the bursting of a bubble.” He said that a bubble is when property prices drop by 30 to 50% and people’s mortgages are higher than the value of the property they have. “We’ve never seen and I don’t believe we’ll ever see a property bubble like that.”
On the matter of overpopulation and its impact on the property market, he said: “That’s the reason why I believe that I find my agents in the office crying because they have three, four, five, six clients with good budgets to rent out or even buy, and there’s nothing available on the market.” He said that the biggest issue in Malta currently is the property supply.
The RE/MAX chairman said that there would be a direct impact on the rental market as a result of a decrease in foreign labour. “All these apartments would become available, and in that case the rental prices would go down … There were times where there was a choice of 15, 20 apartments for rent. The consumer had a huge choice to pick what they want. Today, you don’t find one available. Not one.” He said that when a property becomes available it is sold within hours, with deals sometimes being finalised months in advance of properties becoming available. “That’s how bad the supply is.”