Correction in property prices expected to continue post-pandemic

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A survey on the Maltese property market during Covid-19 shows that most people believe it will take over a year for the Maltese economy to recover.

Increased affordability is what property buyers and renters have to look forward to in the coming months, according to a new survey released by Belair Property together with Anchovy/Onest Data. The survey was conducted between 24 April and 5 May 2020, and it reveals insight into current and future perceptions of Maltese property in the context of the Covid-19 pandemic.

With over 1,000 respondents, including property owners, tenants, landlords and banks across Malta and Gozo, the survey presents views from a cross-section of the Maltese general public. The hope is that the survey’s powerful revelations can be used to take informed decisions in the property market in the months to come.

“This survey clearly shows a general – and justified – perception that especially in certain segments, the real estate market was overheated pre-Covid,” explains Mr Ian Casolani, Managing Director of Belair Property. “The market needed to be more realistic, and we were in fact already seeing price corrections before the pandemic hit. What we’ll see now is the market continuing to settle.

“In certain sectors, property prices will continue to level out and become more affordable. An optimistic view would be that Covid-19 is correcting property prices, bringing them closer to a property’s real value. At the end of the day, the price of the property is what people are prepared to pay for it. This is why, when investing, we say it is all about ‘location, location, location’, because in top locations there is always healthy demand vs supply. As a result, these properties tend to keep their value, even when the rest are levelling out or, in some areas, dropping.”

With almost half of the survey’s respondents showing scepticism about the Maltese economy recovering in less than a year, this kind of affordability is at the forefront of strategic investment decisions in property. For example, the survey shows that a large portion (over 50 per cent) of respondents would need to see a price drop of between 15 per cent and 30 per cent to be tempted to buy property, and 74 per cent of landlords fear for the future of the rental market in Malta.

“Malta’s rate of recovery is evidently a debatable point, but it’s clear that people don’t expect it to be quick,” Mr Casolani continues. “Due to redundancies in the service industries, many foreign workers left Malta during the pandemic, leaving rental properties empty. This has severely impacted the rental market. In addition, some landlords have generously reduced rents to help tenants through the crisis, and they’re keeping rents low to attract new tenants.

“The survey shows, however, that other landlords are willing to wait out this period of uncertainty rather than reduce their asking price, even though they believe that reducing their asking price would increase their rate of rental. All in all, I believe that as long as the Government takes the hard – but crucial – decisions needed to restore Malta’s credibility on all fronts, the coming year will be a good time for expats to return to the island. We’ll then see the levels of property rentals return to what we’re used to.”

The role played by banks in the property market has been a hot topic over recent months. The survey reveals that 68 per cent of respondents feel their bank has not supported them enough during the crisis, and 43 per cent believe banks should establish a Covid-19 credit policy.

“Banks have been helpful from the start of the pandemic by, for example, launching beneficial measures regarding mortgage repayments,” explains Mr Edward Grech, a former banker and consultant. “However, given the responses to the survey, the message may not have come across to the general public. This may be because banks have been reluctant to reduce fees and interest further because, after all, that is a bank’s primary source of income.

“During the Covid-19 period, people have sought less help from banks. For example, requests for home loans have dropped by about 40 per cent. The government’s incentives for first-time buyers and buyers for investment and rental purposes will likely see this downward trend reversed. But there remains a lot of uncertainty, as we can see from the survey’s results. That said, barring a second wave of the pandemic, I think we can expect people to return to work, foreign workers to come back to Malta, and the lettings market to start looking up.”

For a copy of the results from the ‘Maltese Property Market During Covid-19’ survey, contact Belair Property on https://www.belair.com.mt/contact/  or +356 2011 8000.