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Is COVID19 the infamous burst to the property bubble?

Guest Speakers:

  • Alan Grima, CEO, Dhalia Real Estate Services
  • Charles C. Wallbank, Senior Vice President, FIMBank
  • Kurt Xerri, Resident Academic, University of Malta
  • Daniel Zammit, Managing Director, DRZ Group


This webinar entitled “Is COVID-19 the infamous burst to the property bubble?”, was part of the online event “Shaping Malta’s Future: The New Norm”, held in July 2020. The panelists were invited to discuss the impact that the pandemic left on the property market in Malta.


Has the recent progressive increase in property prices created any affordability issues?

In the past few years, property prices in Malta have increased by an average of 4.5% per year. Affordability issues have been on the rise in Malta since 2015. Prior to 2015, property prices were within reach for medium-income individuals. However, although wages were increasing at each occupation level, those in elementary occupations were not experiencing the same wage increases relative to their medium-income counterparts.

Kurt Xerri explained that the increase in affordability issues was mainly brought about by two demographic changes, namely:

Internal patterns: there has been an increasing number of family breakdowns which prompted a greater demand for property, and also increased the type of demand, as divorcees tend to go for smaller properties.

Tourism industry boom: the tourism industry attracted a larger number of foreign workers in Malta who contributed to the increase in demand for property. Additionally, the recent increase in tourism led landlords to shift their focus on the short-term rental market, thereby contracting the supply of long-let properties which in turn inevitably increased the price of property.


To what extent did COVID-19 affect the demand for residential units?

In March and April, the demand was practically non-existent. And this was mainly because social distancing restrictions did not allow estate agents to visit properties with their clients. Therefore, promise of sale agreements dried up. Daniel Zammit stated that the only factor keeping the property market afloat were the promise of sale agreements that were entered into the pre-COVID pandemic.


It looks like demand for property is still there, and Maltese investors want to continue investing in the property market. For that to happen, there has to be financing for it. What is the current appetite for financing real estate?

Charles Wallbank described the different appetites banks have for various types of developments. He started off with developments in the €180-€250k market by stating that the appetite for these types of developments is still there. It appeals to a broad spectrum of buyers, many of which are first-time buyers, single individuals, investors etc.

With respect to the €250-€380k market, the appetite to finance the residential property is still there because this appeals to dual-income earners. However, the appetite for higher-end developments has decreased. Banks are in caution mode post-COVID lockdown and are apprehensive of the potential outcomes.


What has been happening in the rental market in terms of pricing and trends?

The rental market was extremely active over the past 6 years, primarily triggered by foreigners who relocated to Malta for residency purposes. This increase mainly came from the financial and gaming industries.

The changes in rental prices over the same period were therefore also reflective of the demand and supply element according to locality. Alan Grima stated that the average increase in rental rates in the St. Julian’s area was 26%, whereas in Saint Paul’s Bay, the increase was 30% and in Marsaskala, between 20-25%. Naturally, as rental prices increased, demand started to shift according to affordability.

Before COVID-19, rental rates in Malta started to stabilise. This was mainly brought about by the introduction of government regulations. The pandemic brought about a significant increase of properties in the long-let market: about 7,000-8,000 properties which were originally listed on the short-let market, have now shifted to the long-let market.


In the pre-COVID era, rental prices were increasing at a fast pace. What were the original elements of the rental reform, and what was the impact that it had on the rental market in Malta?

Kurt Xerri stated that the main objectives of the rental reform were two-fold: firstly, there was a need for more clarity in the rental market as there was no regulator, and the market was not offering guarantees for both parties. Secondly, no data was being collected by government authorities with regards to the rental market and as a result, rental income was being underdeclared.

The rental reform was a very light-touch regulation in that it formalized the existing practices within the rental market and did not affect rental prices, which left a positive impact on the market.