Despite the economic impacts of COVID on the local economy, arguably worst felt within the tourism industry, property sales continue to perform beyond expectations since the economy reopened in June 2020.
The Malta Developers Association had shocked the public when it announced that July 2020 was the best month for promise of sale agreements since 2017, with the combined value exceeding €330 million.
This trend continued in August, with the MDA announcing a 12 per cent increase in promise of sale agreements signed when compared to the same period last year. While July 2020 saw around 1,600 promise of sale agreements signed, in August upwards of 1,300 were registered.
On Tuesday, Prime Minister Robert Abela took to social media to celebrate that since the Government’s economic regeneration plan was launched in early June, a total of 4,088 promise of sale agreements have been signed, with a total value exceeding €860 million, €100 million more than in 2019.
Many had hoped that with the advent of the pandemic, a correction of housing prices would occur and a slowdown would take place in the property market.
While a relative stabilisation had already begun to take place pre COVID-19, the uncertainty of the duration of the pandemic, coupled with uncertainty surrounding possible further action to tackle subsequent waves, there were expectations of a sustained cooling off of the property market.
At the end of June, property market insights company Djar, which runs a property portal providing detailed market analysis of the local real estate market, released a report to show a slowdown in property prices across 2020 in Malta, but not in Gozo.
While its next property report is expected in October and will provide a greater snapshot of how the pandemic has impacted the market, Djar’s Chief Technology Officer, Keith Galdies was asked to explain the strong movements so far.
“When looking at the property figures for July, one must keep in mind that the situation was almost back to normal in Malta.
“In July, people were going back to their usual lives, employers asked employees to return to the office, people began to socialise and go out again while the Government had also released the COVID vouchers.
“In addition, a reduction of tax on the sale of property also acted as an incentive to drive sales,” he remarked.
As part of it’s June economic recovery plan, the Government introduced the following incentives for the property market:
First-time buyers: Persons who did not qualify as first-time buyers due to being part-owners in property or owners of a garage are now be able to qualify for the first-time buyers incentive.
Tax/duty cuts: Income tax on the sale of property reduced from eight to five per cent, and stamp duty levied at 1.5 per cent instead of five percent for the first €400k on contracts published by the end of March 2021.
Such measures complement the Home Deposit Scheme launched on 3rd June 2020. Through this scheme, Government offers interest-free loans repayable over 25 years, to eligible first-time buyers, aged less than 40, to finance the 10 per cent deposit payable upon signing a promise of sale agreement. The property value must not exceed €175,000.
Turning to his attention as to the impacts of a complete halt on the market between March and June, as the economy was semi-locked down, Mr Galdies said:
“While COVID cases were kept to a minimum in July, many people who had planned to buy property in March or April had those plans disrupted.
“When the market opened again in June, people started viewing properties again, and, in conjunction with the measures Government put out, this led to a resurgence in activity. In a nutshell, when viewed together with incentives and the situation at the time, record sales in July are a consequence of little-to-no sales recorded in the previous months”.
Onto the movement of housing prices, which had been steadily rising for a number of years, “Q2 2020 data shows a very similar situation to that registered in the previous quarter, a standstill in prices with very minimal negative growth rates in most regions,” Mr Galdies said.
President of the Malta Developers Association, Sandro Chetcuti, noted that the strong performance in the property market since June is a result of the Government taking on board proposals made by the organisation to help spur demand within the market.
Mr Chetcuti remarked that the incentives in place provide an opportunity for people looking to buy today, and the absence of such incentives would have led many to take a “wait-and-see” approach, raising the possibility of the property market stagnating.
Asked to share his beliefs as to why the market is responding well despite COVID uncertainty, Mr Chetcuti stressed that property remains the “best investment” to make in Malta, adding that the MDA will continue to make proposals and come up with ideas to take the industry from strength to strength.
The construction and development sector continues to be a sore point for many within the public, the result of unprofessional practices by individual players, a lack of enforcement on behalf of the authorities, sustained noise pollution due to widespread development and a string of housing/structure collapses resulting in the death of Miriam Pace after she was crushed to death.
Despite the continued negative attention, the sector accounts for around 50,000 jobs through direct and indirect employment, Mr Chetcuti highlights, a hefty number on an island with such a relatively small population.
He also noted the hit taken to the tourism sector, a critical sector for the island. Mr Chetcuti said the property market is currently attempting to make good for the deficit created by the loss of tourism.
Pressed for how he expects the market to fare until the end of the year, he said that while nobody could ever say what will happen, his “gut feeling” tells him the market will continue to perform strongly.
While efforts will continue to be made to improve business confidence, consumer demand and economic activity, Mr Chetcuti gave credit to the authority’s handling of the pandemic, even after this second wave.
“While the number of active cases is of some concern, an element of control appears to be present.”