While average rental prices had already experienced a market peak from mid-2019, many have mused that COVID-19 has served as a much-needed price-correcting event in Malta’s property market.
Asked for his thoughts on how the rental market has faired seven months into the pandemic, Co-founder and CEO of Zanzi Homes & QuickLets, Steve Mercieca, argues that slowly but surely, the market would have ended up where we are today, just not as fast.
“A lot of people are pinning percentages down to make a blanket statement on this ‘price correction’, but in my opinion, we need to discuss different segments separately.”
Even after breaking down the market into the various sectors, Mr Mercieca stresses that ultimately, it comes down to the individual property.
“The quality or finish and furnishing of a property is today one of the main factors holding the price, as well as outside space and year of build.
“Whilst before there was a massive lack of supply, so anything would fetch top price, today the situation is different. There is still a lot of demand, but supply has increased overnight due to the crash in the short-let market.
“Something that also boosted these rentals was the high-quality images they already had on file from online listings on short-let sites. These are mostly apartment type properties with good quality finishes.”
Through Mr Mercieca’s experience, the segment which he believes has been hit most in the long-let rental market due to COVID are the older two-to-three bedroom apartments located in employment hubs that do not have such high-quality finishings.
He added that villas and houses with outside space and quality finishings, further away from the city centres, were not really impacted by the pandemic.
“We have seen a drop in demand for complexes and larger community units overall, however, the prices have held.
“In certain cases, we see that many property owners prefer to leave the property empty and sit it out than rent it for a lower price.
“This is understandable as they generally have a good quality finish and since they are in good locations the prices will hold.”
Mr Mercieca added that such property owners are of the opinion, which coincides with his own views, that this will be a temporary ‘gap year’, and such owners are using this time without tenants to upgrade their properties and give it the maintenance required.
“Overall, we need to put ourselves in the shoes of the tenants. These are looking for better deals, in safe environments, hence a villa with a pool would be ideal to keep kids home for long periods and enjoy your own living space opposed to going out.”
Turning to changing tenant needs and request, Mr Mercieca said that most definitely, it is a demand for outdoor space, even if it is just a larger type of balcony or yard.
“We also noticed many tenants giving low offers hoping to close the deal, however the agents would have already done that work and would know how low an owner can go. It's important that both parties in the industry understand each other's position. Whilst some properties have had price corrections, many haven't.”
With the tourism industry not showing signs of a quick recovery as of yet, resulting in many short-let properties being placed on the long-let rental market, added to the issue of many newly built properties being added to the market, Mr Mercieca is asked whether there is a concern of a flood of supply significantly impacting price.
“We have been monitoring this very closely. We believe the short-let market will start to rebuild slowly next season. Having said that, there will be many players who do not go back to this industry and leave their property on the long-let market. There will also be, as pointed out, many new builds coming to the market that were under construction.
“This will continue to have the effect I spoke about above. It will continue to widen the gap between properties with low quality finish and furnishings. Let's face it, the property market was at its peak. Tenants simply could not afford to pay more and that's why it peaked. Now, the ones that were overpriced will come to their true worth, for which there still are many potential tenants.”
For those still interested in purchasing a buy-to-let property, Mr Mercieca is asked for any words of wisdom he may impart through his experience in how the market has performed through COVID uncertainty.
“The dust is settling and people are getting accustomed to this chaos,” he says.
“Now, many will need to learn to accept it, some will need to learn to fail fast, whilst others need to evolve. I mean, it's about time we learn to invest in our investments on the long-term basis – not just form landlords that have properties to let, but even from developers that are building new blocks.
"Lately, we've seen many new developments going that extra step to decorate the large and imposing party walls we are building. I believe this is a step in the right direction, as this in itself not only adds to the value of the property and holds its price longer, but also contributes to well being of our overall society, this of course is an entirely separate conversation which I definitely believe we need to be having.”
Steve Mercieca - Co-founder & CEO of Zanzi Homes & QuickLets