Watch: Re/Max Chairman Warns People Spending Less, Leaving Some Property Developers Overexposed
The co-founder of one of Malta’s leading real estate agencies has warned there could be trouble brewing within the property market, as people are spending less than they used to and a good number of developers have been left overexposed.
Interviewed on Jon Mallia’s podcast, RE/MAX chairperson and former CEO* Kevin Buttigieg said he expects a good number of developers to face pressure to sell their properties quickly, even at a reduced rate, within the next two years.
“How can you figure these things out? Go to your local butcher and ask him if his meat sales are down and I guarantee he will tell you he’s selling a lot of chicken right now,” Buttigieg said.
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“Go to your friend who owns a restaurant and tell him how well he’s doing because the restaurant is always packed. However, he will tell you that while the restaurant may be full, his average income is down by 20-30% because people are no longer buying three starters, two bottles of wine and a nice fish. They come, have a plate of pasta and go home.”
“What glitters isn’t always gold.”
Turning to the property market, Buttigieg said developers are under pressure to repay their loans because they aren’t selling enough of their stock while building costs have shot up.
“If he bought a site two years ago and the building cost went up by 30-40%, he’s screwed,” he said bluntly.
As an example, he said is currently building five flats on a penthouse he owns but had to fork out an extra €15,000 per flat to build extra steel structures after cracks (konsenturi) were found in the garage.
“That’s just five flats, but now imagine a guy building 30 flats,” he said. “People also take too long to finish a product. Either the electrician doesn’t turn up for three months or the aluminium should have been installed in January but the guy doesn’t come till April.”
“These all involve costs, and if you have a loan of €1 million at 6% interest, that’s €60,000 a year. It’s eating your profit on a daily basis.”
You can watch the full episode below.
*The article has been updated to clarify that Kevin Buttigieg is no longer CEO
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