Real estate companies are still feeling the impact of the COVID-19 pandemic, some stakeholders say, despite recent figures published by the Malta Developers’ Association claiming buoyancy in the sector.
According to figures released by the MDA recently, October was the best month so far this year and one of the best since 2017 in terms of the number and value of promises of sale agreements registered with the authorities.
The MDA has said that 1,551 such agreements were registered, amounting to a total sales value of €371 million, up 21 per cent, in terms of numbers, and 36 per cent, or €100 million, in value, over October 2019.
These figures could not be confirmed by stakeholders to whom The Malta Business Observer spoke.
However, also speaking to The Malta Business Observer, the MDA President, Sandro Chetcuti, insisted the preliminary data published is reliable and 100 per cent correct.
He acknowledged that some real estate agents might doubt such figures because competition in the market meant that, while some were experiencing positive developments, others were encountering problems.
Mr Chetcuti said that, according to his own observations, demand for low-end property – priced up to €250,000 – has grown while the number of buyers looking for upmarket, high-end units has dropped slightly.
In light of these figures, Mr Chetcuti claimed that the healthy performance by the real estate market should also be attributed, at least in part, to the proposals made by the MDA and which were adopted by the Government.
Another contributing factor, the MDA President continued, was the fact that putting one’s money in the bank was becoming a costly exercise, not to mention the many questions one is asked when doing so.
This, he said, was leading many to invest their money in property. Moreover, many are understanding the value of property as an excellent investment, he said.
By way of example, it appears that there is a surge in interest in garages and parking spaces, not only for one’s vehicle, but also for investment purposes.
There is also a growing demand by private individuals for agricultural land to serve as a recreational area for their families and friends, he noted.
The MDA, Mr Chetcuti pledged, will continue to closely monitor developments over the next two to three months so it can make timely proposals to the Government to sustain the market if it deems it necessary.
However, in reaction, Benjamin Tabone Grech, Chief Executive Officer of Engel & Völkers, noted that, since he did not know how the MDA data was generated, he could not comment about it, though he added that he would be very interested in having access to this data, which, he believes, was available to the Finance Ministry.
Such information would be useful to produce specific market reports for validation purposes, he remarked.
Mr Grech pointed out that, judging by the experience of his own company, the past months were the worst in terms of promise of sale agreements.
“We have not concluded a single promise of sale agreement for quite some time now,” he shared.
He acknowledged that the measures announced in Budget 2021 did lead to more enquiries being made and also affected demand positively. However, the perception remained that prices are still more or less the same, Mr Tabone Grech asserted.
Agreeing that, in some instances, a drop of four or five per cent in asking prices was being made across the board, this was nowhere near the decrease expected by prospective buyers, Mr Grech said.
It was only the incentives launched by the Government that made a little difference and nothing else, he insisted. Saying he would continue to be an optimist, Mr Tabone Grech felt this was an opportunity for one to rethink what one wants the market to look like.
There is no doubt, he went on, that a very large stock of property remains unsold and, since financial direct investment is not what it used to be, until just a short time ago, corrections can be made without risking a downturn.
The CEO noted that the practice of people buying property on plan is becoming less popular and prospective buyers are laying stress on quality. There is also “an oversupply”, he noted, pointing out that between 60,000 and 70,000 new units were built in the span of 13 years and questioning whether all of them are inhabited.
The Planning Authority needs to revisit its policy on new dwellings, according to Mr Tabone Grech. He insisted on the need for both the Government and the planning regulator to have a robust development strategy.
“Of course, there is purpose in allowing development. However, there must be a clear direction and objective,” he argued.
However, Michael Bonello, CEO of Alliance Real Estate People, has a different experience to report. Apart from the few months of partial lockdown – when everything was at a standstill – it seems the pandemic did not really dampen the market’s appetite for sound investments in real estate, he said.
“It is clear the measures announced by the Government in June have had the desired effects of stimulating the market and substantial interest generated during summer resulted in consistently increasing sales in the run-up to the beginning of the fourth quarter,” he noted.
Mr Bonello added that, since Alliance launched its new brand in July, its database grew with many new properties and the sales volume concluded was sufficient for Alliance to enable it to reach last year’s targets.
The company recruited about 30 new property advisors and was seeing “a great deal of interest” from other independent estate agencies to join Alliance Group.
However, he pointed out, franchising growth is not within the company’s immediate plans.
In the meantime, Douglas Salt, Director, Frank Salt Real Estate Ltd, noted that, at the beginning of the year, the stable real estate market was experiencing a period of “slight correction” in both sales and letting after a period of overheating.
When Malta was affected by the COVID-19 outbreak, the market practically stood still for almost four months but, as the figures of people afflicted by the pandemic started to drop, the sales market got going once again, he noted.
Pricing patterns remained unchanged despite talk of a disproportionate drop in pricing, he said, adding that, as uncertainty continued to prevail, more people opted to invest in property, resulting in a record number of sales between July and October.
He acknowledged that the letting market experienced “some trying times”, with monthly rents being adjusted to a more reasonable level and becoming more affordable.
Mr Salt pointed out that this would have happened nonetheless as more units are put on the market.
He expects to see a return “to a semblance of normality in the tail end of next year”.
The property market has been doing quite well, especially when considering what Malta and the rest of the world are going through, Ian Casolani, Managing Director of Belair Property, says.
He notes that figures published recently by the Malta Developers’ Association showing that October was the best month so far this year and one of the best since 2017 in terms of the number and value of promises of sale agreements registered with the authorities, tally with what his company has been experiencing.
Mr Casolani, however, points out that the figures also include the backlog of property transactions that were not registered during April, May and June, when the Court Registry was closed due to COVID-19.
“The market,” he explains, “has seen steady activity from end users and real ‘home buyers’. Those looking for a home or residence have been taking advantage of the price corrections taking place as well as the incentives and measures put in place by the Government.
“Houses with outdoor space or penthouses, due to their large terraces, have probably witnessed even more demand and activity than the rest of the market and this is down to the fact that many have come to appreciate the value of outdoor space after having lived through recent COVID restrictions and restricted lifestyle,” the Managing Director observes.
He notes that buyers are now “thankfully” more attentive and diligent, which is not that pronounced when the market is booming. This means, he continues, means they are monitoring the market more, aware of price corrections on property that fit within their search criteria and ensuring they buy at the right price.
Referring to the data released by the MDA, Keith Galdies, CTO at Djar, a real estate online listings platform, noted that, on the basis of the figures published, the average value of the properties for which a promise of sale agreement was signed stood at €240,000.
Djar’s own data, based on property listings, shows that both supply and pricing remained relatively stable, he pointed out, adding this could be partially attributed to the typical property transaction cycle and the time lag between listing, negotiation and offer, promise of sale and final transaction.
“Having said that, we cannot exclude that a number of these promises of sale include other types of properties, such as graves or properties transferred from parents to their children, taking advantage of the higher duty-free threshold introduced during the last Budget. Unfortunately, there is no public data available on this to back it up,” the CTO remarked.
However, going forward, he predicts that the Budget 2021 property measures are likely to result in more stability in supply, while the effect on pricing still needs to be gauged further down the line.
This feature was first carried in the November edition of The Malta Business Observer