Developments over the past months point to a reversal of the consistent upward trend that was prevalent in the local rental market over the past year, the Malta Financial Services Authority said.

The financial services watchdog noted in a report that transacted property prices in 2019 continued their upward trend, registering a year-on-year growth rate of 4.5 per cent in real terms.

Extrapolating the current trends for 2020, it continued, would indicate a high likelihood of prices increasing further. “However, given recent developments this is unlikely to occur. The COVID-19 pandemic is likely to leave its mark on the real estate market as well,” the Regulator warned.

The impact of the pandemic is already being felt in the holiday rental market due to the cancellation of flights and the social distancing measures introduced during the first quarter of the year, the report noted. According to AirDNA.com, there were 11,330 active listings on Airbnb for properties in Malta in the week ending 9th February 2020, the number dropping to 10,236 by the first week of June.

In the MFSA’s view, the drop in listings suggests that property owners are opting to look for more secure long-term rentals given the uncertainty surrounding inbound tourism this summer. In turn, it explained, the properties removed from Airbnb listings are likely to increase supply in the long-term rental market and this, coupled with lower demand due to a significant number of repatriations and suspension of operations in certain sectors, is likely to have significant repercussions on rental prices.

The report forecasts an occupancy rate of about 48 per cent, compared to about 80 per cent in August 2019. It also expects that the decline in the rate in October, as the peak season draws to a close, will be much sharper than a year ago.

Though locals might be tempted to book summer breaks in Airbnb residences, the MFSA still thinks the short-term rental market is likely to be the worse hit real estate segment, followed by long-term rental market.

An exercise the Regulator conducted to obtain some insight into prices for long-term rentals resulted in a database of over 13,000 rental listings, the big bulk of which consisting of residential properties. Over two-thirds of the listings were apartments having an average monthly price of €1,214.57, with the highest average rental prices across the island being charged for units in the Northern Harbour region.

Prices of new listings were found to be lowest in Gozo.

Although the drops were most pronounced in the Northern Harbour region, overall, the average advertised price for apartment rentals was lower across the island, the MFSA pointed out. Based on the data resulting from the exercise it undertook, there was a 14 per cent decline in the average advertised rental price for an apartment in Malta during the height of the COVID-19 pandemic.