Prime Minister Robert Abela has dismissed suggestions that Malta might be in a property bubble after a newly-released Housing Authority survey indicated that 82% of landlords are cautious on investing further in the rental market.
“I don’t believe we’re in a property bubble,” Abela said when asked by Lovin Malta about this survey at a press conference today.
To back up his argument, he noted that the value of property sales hit consecutive records since June 2020, when the government temporarily reduced the rate of property transfer tax and stamp duty on property sales to 5% and 1.5% for the first €400,000.
This tax holiday was originally valid for agreements entered into before the end of April 2021 but it was later extended to the end of July.
“This measure had a phenomenal impact,” Abela said. “While we saw austerity around us, we chose to incentivise people instead.”
“This approach led to dividends in the sense that property sales exploded. These are encouraging signs that go against the property bubble thesis.”
A landmark Housing Authority study on the Maltese rental market, published today, included a survey by statistician Vincent Marmara among a random sample of 415 tenants and 365 landlords. The data was then compiled by policy consultant Stefan Cutajar.
Carried out over 12 days in April 2020, the survey intended to assess the immediate impact of the COVID-19 pandemic on the private rental market.
Asked back then whether they would consider investing further funds in the rental market, 82% of landlords said they wouldn’t, with the most common reason being that it “wasn’t a good time to invest”.
“One may assume that such levels of scepticism were probably the by-product of the various predictions surrounding a cataclysmic decline in net migration towards Malta and Gozo due to the onset of this novel pandemic, which in itself may be interpreted as an indicator of the high degree of dependency on foreign demand in the local rented housing sector,” Cutajar wrote.
“As described throughout this chapter, contrary to initial forecasts, this predicted exodus of foreign labour did not come to fruition especially with respect to third-country nationals.”
“However, the predicted sharp declines in tourism did in fact alter the playing field in the rental property market, with a significant number of short-term rentals being shifted to the long-let market and directly impacting supply and pricing.”
A spokesperson for Social Accommodation Roderick Galdes also played down concerns of a property bubble, noting that the survey was carried out in the second month of the first wave of the pandemic, before the government introduced initiatives for the housing market.
“The Ministry for Social Accommodation and the Housing Authority reiterates their steadfast commitment to evidence-based policy, and full transparency with regards to their continuous research and development efforts in the local housing sector,” he told Lovin Malta.
“The first edition of the Annual Malta Residential Rental Study, developed in collaboration with researchers from the Maltese Central Bank, is testament to this empirical methodology in policymaking.”
“First and foremost, the scientific survey conducted by Dr. Vincent Marmara on behalf of the Housing Authority was intended to provide a detailed snapshot of the state of the private residential leases market in the month of April 2020, which in hindsight represents the second month of the first wave of the coronavirus pandemic in Malta and Gozo.”
“In fact, from data extrapolated from the Authority’s publication registrations rebounded in May 2020 and kept increasing at a steady pace until the end of the year, with the vast majority of renewals for 2021 retaining the same rental prices as those registered in 2020.
“These figures are encouraging signs of recovery, and when coupled with the positive economic predictions published in the European Commission’s Spring 2021 economic forecast, should inspire confidence in the private residential rental market for landlords, tenants and all intermediaries operating in the field.”
“In conclusion, given the time-sensitive and context-specific nature of the survey and its findings, it cannot be reasonably argued that the sentiments expressed by the participant landlords are indicative of a property bubble or anything of the sort.”
“As rightly pointed out by the Honorable Prime Minister in his reply, the Government of Malta’s policy initiatives quickly stabilized the housing market and contributed to a healthy growth in property sales and peace of mind in the rental market.”