COVID-19 no match for Maltese property market as prices rise faster than ever

Property prices have grown by 6.7% since last year, according to figures published by the National Statistics Office

Property prices have grown by 6.7% since last year, according to figures published by the National Statistics Office.

The Immovable Property Price Index traces price growth in the property market using 2004 at its base year.

As published in the government gazette last month, the provisional index at 2022 stands at 222.33 – meaning houses are twice what they costed back in 2004 – up from 208.37 in the year before.

Indeed, the rate of change between 2021-2022 was the largest growth spurt to date. The last time the rate of change increased by over 6% was in 2019, when the property index grew by 6.5% between 2018-2019.

The immovable property price index confirms what researchers have established before. The local property market saw massive growth between 2015 and 2022. If a property was priced at €151,000 in 2015, it is now valued at €222,000.

COVID-19 was no match for the property market either. Prices continued to grow at rates of 5.5% and 4.6%, which were still higher than the change rates seen between 2011 and 2015.

While the rate of change slowed during the pandemic, it is now back on its previous trajectory of rising prices.

Government introduced a reduced tax and duty rate of 5% and 1.5% respectively on the first €400,000 of immovable property’s value. This reduction had been a temporary COVID-19 measure introduced in 2020 to keep the property market afloat.

The registration date of the final deed on property transactions eligible for the scheme had been extended from the end of June 2022 to September 2022.

Jerome Caruana Cilia, the Nationalist Party’s spokesperson for finance, proposed that the scheme be extended until at least the end of January 2023.

Many researchers have been trying to gain insights into Malta’s property market. Last June, Dhalia Real Estate and Grant Thorton collaborated on a study and found that today’s house prices are double what they were in 2013, with fast growth recorded in the five years leading up to 2019.

But is this sustainable? Daniel Gravino, the economist who presented the report and findings, had said that current market prices are “just sustainable” if people’s expected future rental income is based on rents that prevailed in 2021. Whether these rates can be sustained over time depends on several demand and supply factors.

In a separate study from last August, economists Glen Spiteri and Marie Briguglio found that single people living in Malta have little hopes of buying a property unless they buy it with another person or inherit a family property.

Property prices are far from hoomogenous. Last year, the Central Bank of Malta developed its own housing index, using Sliema property as a base, to compare real estate prices across the country.

According to the index, the cheapest rental properties with respect to Sliema were found in Gozo. One-bedroom apartments average at a monthly asking price that is 64.3% less than a comparable unit in Sliema.

But Gozo might not be safe from rising property prices in the long term. A separate property market report by Djar and EY showed that the Gozo property market had been reporting persistent price growth across the island, indicating continued price convergence and increasing homogeneity between the two islands.