House prices still growing, but at slower pace compared to pre-pandemic levels

Housing prices are continuing to increase, but are doing so at a much slower rate compared to pre-pandemic levels, according to a new housing report from GrantThornton and Dhalia.

The study, conducted by economist Daniel Gravino, shows that housing prices are still going up, but is doing so at a slower pace. In the second half of 2022, prices increased by 1.7% compared to the first half. Meanwhile in the first three months of 2023, prices declined by 2.9%.

Despite the decline, prices still remain higher than what they were in 2019. Housing prices were going up at an average rate of 15% per year up until the pandemic. Since 2020, prices have still grown, but at slower rates.

Rental prices grew by 8.7% in the second half of 2022, and remained more or less the same during the first three months of 2023.  This marked a full and sustained recovery from the decline in rental prices during the COVID-19 pandemic.

Housing affordability remains a concern

Dhalia CEO Alan Grima said that affordability remains a significant concern, although slight improvements have been seen in recent years.

He said there remains a significant challenge for certain groups, particularly first-time buyers, to get a leg into the property market.

The housing report shows that the maximum affordable house price for a one-adult household is €160,000. “This is a long way off from the average house price of €250,000,” Gravino said.

Meanwhile, a two-adult household has an easier time buying property, and is able to borrow and spend €303,000. However, Gravino said this is still affordability challenges here if  the collective income is below the median. A two-adult household on minimum wage can only afford €145,000, signigicantly lower than the average price of a housing unit.

Emphasising quality

Planning Minister Stefan Zrinzo Azzopardi said that stakeholders need to focus on quality across the board, whether it is in building design, materials or other operational methods.

“Focusing on quality does not mean overlooking affordable housing,” he said. “This study is an opportunity to understand affordability and sustainability can work in tandem.”

The minister said that a primary objective is to build energy efficient buildings without burdening the end consumer, and that doing this would involve behavioural changes from contractors, developers and consumers.

Zrinzo Azzopardi also said that there needs to be a growing focus on raising standards. “This is not just about the regulatory process.”

He said the Building and Construction Authority (BCA) is evaluating all suggestions made to it during the public consultation on the licensing of contractors, with the next steps being to issue the legal notice and begin the licensing process within a realistic timeline.

With regards to energy performance certificates (EPC), which are set for a revamp, Zrinzo Azzopardi said his ministry is working on changes to the way are updated as well as an update on the regulations that will forge the new EPCs.

“The average consumer is not aware of energy efficiency in buildings,” the minister said, adding that real estate agents could play a key role in advising consumers on the energy efficiency of buildings, apart from design and location.

Zrinzo Azzopardi also called on the industry to make sure construction projects do not leave a significant and negative impact on the community around it, particularly by upgrading methods used in the building process.

The emphasis on quality in the housing market was echoed by Grant Thornton partner George Vella. “We have the responsibility to raise the bar and go for more quality things,” he said while introducing the report.

He added that the housing market is in a phase where those who invested wisely in the sustainability of their construction projects are starting to see the benefits, with investors looking at potential savings of €44,000 over a 30-year period.