News • 26 January 2003

Property prices surge, with speculation rife

By David Lindsay
Unbridled speculation, scandalous amounts of vacant housing stock gathering dust, rent laws so antiquated their inspection is best suited to an archaeologist’s trained eye and exclusive developments pushing the property price ceiling ever-higher – there can be little doubt that Malta’s property market is in dire need of a stabilising elixir.
But and while speculation continues unabated, the debate over reforming the country’s rent laws and the dilemma over how to free up vacant dwellings persist with no end in sight.
By Malta’s new upmarket residential projects – such as the Verdala Mansions, Portomaso and the Manoel Island Tigne´ Point developments - are contributing to Malta’s upwardly-mobile property price market, which has been rising steadily over the last decade (see chart).
These projects have inevitably raised the price ceiling at the upper end of the market and the trickle-down effect is also expected to take its toll on the rest of the price-sensitive sector.
MIDI consortium’s Manoel Island Tigne´ Point project is a case in point and, apart from setting new benchmarks in pricing, it is also leaving ample room for speculation through staggered payment terms that will allow the consortium to fund, to a certain extent, the Lm140 million project as it progresses toward completion.
Splashing out a non-refundable Lm2,000, an apartment included in the first stage of the development, Tigné Point south, can be secured for a month – within which time a promise of sale (konvenju) must be signed. Once signed, the buyer pays 10 per cent of the purchase price, less the Lm2,000 deposit.
When an architect supplies a certificate stating that the shell construction of the apartment in question is complete, the buyer must pay another 50 per cent of the sale price within 30 days.
Another 25 per cent of the purchase price is due within 30 days of an architect certifying that the shell construction of the block itself is complete. The fourth and final payment, of a further 25 per cent of the balance of the purchase price, is due upon the signing of the definitive deed of sale.
Sales to date have been highly successful, with nearly all 141 apartments included in the south phase of the Tigne´ Point segment of the Manoel Island and Tigné Point development being reserved.
However, it still remains to be seen to what extent speculation on the much sought after properties will play its part, with staggered, low payment terms and high demand levels providing a tool for market speculation. Additionally, the trickle-down effect such speculation might have on the property market as a whole also remains to be gauged.
However, if speculation is the result of the development’s attractive payment scheme, it would be nothing new, as speculation has always been rife.
In a similar vein, the prospect of joining the EU in particular has prompted many to predict a surge in property prices as EU citizens flock to the Islands looking for their place in the sun.
In fact, the property market has been bullish of late and has experienced a mini-boom of sorts over the past months, perhaps in anticipation of EU accession.
Frank Salt Real Estate Managing Director Joe Lupi told our sister paper, The Malta Financial and Business Times, this week that sales had escalated recently and he singled out the Tigne´ Point development as an influencing factor. Other estate agencies however, have reported good sales across the board.
Lupi explains that on average, property has appreciated between eight and ten per cent during the past 10 to 15 years.
"The increasing demand for property in certain areas has to be addressed by increasing supply. Otherwise prices will shoot up.
"There could be a slight increase if Malta joins the EU, as some property owners may believe that foreigners would rush in to buy property in Malta once the country joins.
"I believe that eventually prices will stabilise. Like any other client, a foreign client will buy property after having seen other locations in the Mediterranean and, unfortunately, countries like Spain and Cyprus in some respects offer cheaper properties than Malta."
Dhalia Operations Manager Andrew Gatt, meanwhile, explains that the Structure Plan for the Maltese Islands has greatly restricted the land available for building in Malta and Gozo, resulting in an escalation in the prices of land. Gatt says Malta’s accession to the EU is not expected to have a direct effect on property prices, suggesting that only traditional demand and supply patterns will put pressure on prices.
Negotiations over free movement of capital with the EU still limit non-Maltese nationals to own just one property at a cost of not less than Lm30,000 for flats and not less than Lm50,000 for houses. They will only be able to buy their second property after five years of residence on the islands.
Gatt says the derogation obtained by Government means nothing much has changed in terms of benefits for EU citizens purchasing property in Malta. The same restrictions will apply: "The only difference is that EU citizens can rent any property which they own in Malta, even outside designated areas."
Gatt gives his view on why property prices have increased, "Property is the historically-preferred form of a sound and solid investment. Many individuals in Malta prefer investing their money in property rather than equities or any other type of investment. This has enhanced the demand for property, pushing prices upwards over the years."