Joseph Muscat Predicts Rent Prices Will Fall And Urges Malta To Focus On Niche Tourism
Long-let rental prices in Malta are expected to drop, according to an economic forecast drafted by former Prime Minister Joseph Muscat in light of the COVID-19 pandemic.
In his report, a copy of which has been seen by Lovin Malta, Muscat predicted that the tourism sector will decline next year, even if a vaccine is made available before the end of 2020, and this because the substantial hit in disposable income worldwide will “significantly” lower demand for travel.
For the tourists who do come, he predicted the trend will shift away from shared accommodation, through platforms like Airbnb, and towards hotels, and this because hotels will have more openly verifiable health protocols.
The means properties that were until recently used for short-term rent will start being used for long-term lets, increasing supply and dampening rent prices “which were considered to have an inflationary effect over the past years”.
Muscat advised the government to focus its resources on niche tourism, such as culture, entertainment and events, “where demand is less elastic and where value added is higher”.
The former Prime Minister’s report, which was drafted on 24th April, laid out four potential economic scenarios depending on the world’s ability to restrain the pandemic.
The best-case scenario assumes reliable anti-body testing will soon be widespread and this would reveal that a relatively large part of the population is immune to COVID-19 and that the level of immunity is quite high and long-lasting. It also assumes that a vaccine will start to be rolled-out to the public by the end of this year.
In this case, a large part of the population will be able to return to work this year and that travel destinations will slowly start easing as of the start of summer. However, travel will remain restricted till the end of 2020 when the vaccine starts to be administered to the world population.
The local transmission curve will peak in the third week of April, with lockdowns starting to be partially lifted by the start of May. Domestic economic activity will start to slowly return to normal after around an economic lockdown of six weeks.
Supply-side disruptions stemming from imports will last till the worse affected economies start opening their manufacturing plants, around ten weeks from the start of their lockdowns, and affecting 15% of manufacturing industries.
Following the worldwide roll-out of vaccines, economic activity and the tourism industry will return to normal in 2021.
The worst-case scenario assumes immunity guaranteed by anti-bodies gained through infection proves to be short-lived and unstable, which will mean lockdowns will only be completely lifted once a vaccine is made available to the public. In this scenario, the vaccine will only be rolled out in the fourth quarter of 2021.
Malta’s lockdown will be partially lifted after eight weeks and mandatory quarantine will still be imposed on foreign travellers till the third quarter of this year. Travel will reopen in the fourth quarter of this year but will still be severely restricted.
Lockdowns in restaurants and accommodation outlets will be partially lifted but restrictions will remain in force until the third quarter of 2021. Import restrictions will become less severe but will affect manufacturing throughout the rest of 2020 and the first three quarters of 2021.
External demand will severely hit foreign oriented industries with severe second-round effects on local demand.
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