Editorial: Property bubble: Bursting or not?

The Malta Developers Association and the Estate Agents say that there are no indications that the property bubble is bursting.

They are, of course, defending their turf. They would be the last to admit that something is going wrong in that part of the economy which is filling up their pockets. Even if, secretly, they admit between themselves that things are changing, they will do their best to downplay the situation.

But there are always risks, in life.

Three economics lecturers who were interviewed by this newsroom highlighted several factors which can contribute to, at least, a slowing down in the property market.

“There is little to indicate that there is a bubble right now but there is a risk stemming from interest rate increases and the decline in foreigners coming to Malta,” one of them, Marie Briguglio, said. “Then again, judging by the history of governments stimulating housing demand, it is unlikely that the bubble, if such were to emerge, would be allowed to burst”.

“Supply and demand imbalances, rising labour and construction costs and the availability of low-interest loans are all factors that can cause house prices to increase without indicating that a bubble is present,” another economist, Charmaine Portelli, said.

“We need to ensure that reliable and timely information about what is happening in the housing market is readily available so that potential sellers, buyers and investors can make informed decisions,” the third economist, Daniel Gravino, said.

All are valid points, and all are points that should always be considered.

The price of houses and rents has seen a rapid rise in the last 10 years. We have seen an unprecedented jump in the population, as more and more foreigners come over or are brought over to take up jobs that many Maltese do not want to do anymore and also to fill up places created by a growing economy.

We saw a slight dip when the Covid-19 pandemic hit, but this was quickly made up for in subsequent months. How long this will go on is hard to say.

As long as there is demand, the prices will continue to go up. It has been estimated that, in 2013, an average-sized apartment would sell for nine times the annual salary; today this has gone up to 12 times. But people continue to buy, which means that the possibility of prices going further up remains.

What needs to be kept in mind, in all this, is that what is happening has put a greater burden on Malta’s infrastructure and the environment. Our roads, our services and our energy are struggling to keep up with the property expansion.

The property sector does not work on its own, and these external factors should never be discarded in the overall equation.