The Property Market Post-Pandemic
It is well-known that the pandemic has affected many industries and markets in Malta. The property market is intricately linked to other well-performing markets and industries that have taken a hit in the last year. To have a greater understanding of the property market’s future, it needs to be looked at holistically – each sector has been affected, but differently. Some have done well, whilst others were hit hard and will need time to recover. Despite this, there is also the opportunity for growth and a sharper focus towards quality and flexibility.
Recent reports show that residential sales did well in the last year. The MDA stated that promises of sale were high, with 13,867 being registered, and brought a record sales turnover of over €3 billion. “Everyone’s baffled with the numbers”, says Chris Grech about these results, “but you have to decipher that, because there are certain areas in the property market that have been very negatively affected by the pandemic, and there are other areas in the market which have been positively affected”.
The incentives that the government introduced to help boost local sales in Malta and Gozo have been a significant help towards the numbers seen in last year’s sales. The numbers show that the demand for local ownership, as well as buy-to-rent property investment, is still present. The local property market is a key contributor to the economy, and it will continue to be – but it is not the only segment that should be highlighted. “It’s not bad, it’s good, the local market is good”, declares Chris Grech about the property market.
The market’s other sizeable contributor – the high-end market segment, also needs to be looked at when looking at the future of the property market. This segment relies heavily on foreign investment, which effectively came to a standstill when the airports closed back in 2020. However, this does not mean that investors have lost interest. “A number of investors are waiting to come here”. Despite this, it will be difficult to catch up to the progress made regarding foreign investment pre-pandemic, but that should not stop us from trying.
It is through foreign investment that the high-end market has been able to produce developments in their current quality and quantity. However, a substantial amount of work will be necessary to attract the attention of foreign investors once again.
A considerable number of high-end market properties are in development to bring in foreign investment. Interest in these developments have slowed down, so the government and local agencies will need to bring it back once restrictions are lifted and the market picks up again. The challenges faced in the slow start to encourage foreign investment will need to be taken on once more. The supply is there, but the demand needs to be nurtured. “We need to revive that, we need to start that again, and that’s going to take time to”, as said by Chris. Despite this, there is hope. “I have faith that there will be growth in the market”.
Overseas competition is also increasing. “We have a lot of competition out there. A lot of competitors are starting to show their strength”. Malta will need to compete with that, and the labour of that pro-active marketing will require time to bear fruit. Our rising prices will also have to be considered as competition grows, as “we are considered expensive and we have to take on that challenge”.
The importance of foreign investment will remain relevant to the economy. “We don’t need much, and that’s why we’re lucky – very little will have an impact on the economy but we need quality investment”, Chris expresses. It is vital that Dhalia utilises this moving forward.
The rental market was hit, but we must look at all its relevant segments. The rental market has strong links to tourism and migration. Foreign investment is where a majority of Malta’s national resources lie.
The rental market will need more time to recover. It has been reported that long-term rental rates have fallen at least 11% on average and Dhalia also noted that prices went down by 20-25% in most cases. It has also been reported that the short-let rental market was the worst hit out of all property market sectors in the last year. Furthermore, it is in direct competition with hotels, which rely heavily on the performance of the tourism industry.
The short-let market, particularly through the growing popularity of platforms such as Airbnb, has immense potential and is growing in strength worldwide. Concerning its activity in Malta, its growth is dependent on the subsequent revival of the tourism industry.
The future of the long-let market, however, does look promising. Many owners have had to list their properties in the long-term market – and this seems to be where the majority will most likely take root, post-pandemic. “I think we’re going to see so much growth in the long-term market that a number of investors who previously went for the short-let market will change to the long-term market”.
Recognition fee equivalent to one year’s ground rent (only applicable to properties subject to ground rent)
The local buy-to-rent investment market is strong, and investors will have to start weighing the differences between the short and long-term sectors. The pre-pandemic prices will take a few years to get back to, as this sector shows no sign of slowing down. Migration to Malta and interests in renting will keep both supply and demand high.
The commercial market also faces its own challenges. This sector has also been negatively impacted, particularly concerning retail. Businesses have had to re-locate or even shut down due to the pandemic. Yet, there is hope that activity will recover; the strength of retail outlets corresponds to the strength of the tourist industry.
The property market does require an increase in demand for the office space sector. “The potential is there. There’s a lot of people who are very keen and interested but waiting”. Both demand and supply are at hand. Nevertheless, the indeterminate delay in the investment of this sector is a complication that needs to be dealt with.
When it comes to Brexit, the uncertainties surrounding the future of Britain’s economic relationship with the EU presents an opportunity for us. “With Brexit, there’s a number of people who are looking at Malta. The potential is there”. Many British companies need to have a presence within the EU, and this interest may trigger numerous opportunities for our economy.
The pandemic brought more attention to changing customer values. There have been calls for an overhaul on the way property is developed and how current trends need to be considered. There has been a significant increase in requests for properties with a private workspace, and spacious outdoor areas. The construction industry needs to find a balance between affordability and people’s lifestyles requirements.
People’s lifestyles are changing; the requirements for a property are now different. Property is a life-long investment, so the product must good. “Quality is starting to improve, and you’re seeing it through those that are insisting on quality. It is being delivered – where it is not, the developer hurts”, affirms Grech. Buyers are now focused on the quality of their investments, rather than quantity, and the developers need to adapt to those values.
This uncertainty surrounding the pandemic also revived the importance of flexibility, adaptability, and creativity. This can be translated to the property market – particularly with properties already built. “We need to focus very heavily on re-development. There’s a lot of potential there”, asserts Grech. Recent development policies that maintain boundaries on development areas assert the potential of re-developme
Other countries, such as Norway, Sweden, and the UK have done well with this type of development. Older properties are modified to embellish the unique qualities of their traditional features. This practice is commonplace, and Malta could adopt this practice. The price of land continues to climb, and there is a deepening shortage of building space. It is important to retain our rural land, so we must explore other avenues. We need to be flexible and open to change, but the existing policies restrict re-development in a big way. This could be a wonderful opportunity to be creative and highlight our unique culture more than ever before.
We must be pro-active in our branding and whilst our reputation may have taken a hit, we are working on improving accountability and transparency.
The future of the property market is not clear-cut. Depending on the sector, recovery will be slow, but there is hope for the future. Foreign investment and the local sales market will continue to be driving forces, but the revival of the rental and commercial segments will require help from the tourism industry. However, with the roll-out of COVID-19 vaccines, and the dependable interest of foreign investors, there is confidence that this resurgence will be happening sooner, rather than later.
Malta has fierce and increasing competition, and so we must work harder than ever. The property market has weathered the storm, and in some cases even prospered. But the worst is not over yet. The market has seen great growth in the past, and it can once again. To achieve that what we need is consistency, challenging work and a strong focus on ensuring the local market is flexible, creative and skilled at operating outside the box.