The general asking price level of properties has risen by over 20% in the space of just one year, while the housing affordability index for different types of properties has decreased by between 8% and 17%, a study commissioned by the Malta Developer's Association and carried out by KPMG shows.
The study shows that between 2016 and 2017, the general asking price level of apartments, maisonettes, and penthouses rose by 24%, 21% and 22% respectively. The Housing Affordability Index in the case of these three types of properties meanwhile saw a 13%, 8%, and 17% respective drop. This drop was also registered in the space of time between 2016 and 2017.
The Housing Affordability Index was defined by David Pace, a partner at KPMG and the person who presented the study's results at Castille on Friday, as being the median household income compared with the income needed to afford to buy a typified median priced property in the market.
For each property category, the selected typical property shared the characteristics of being available in the Central, North-West, and Southern regions of Malta, having three bedrooms, no views, and a size of 130 square metres in the case of apartments and 150 square metres in the case of penthouses and maisonettes.
Regionally speaking, the study found that property was by far at its most expensive in the Grand Harbour and the North Harbour areas, with an average asking price of €3,920 and €3,747 per square metre for a finished apartment respectively.
By comparison, the same average asking price per square metre stood at €1,933 for the North West area, €1,770 for Gozo, €1,689 for the Central area, and €1,595 for the Southern part of the island.
8.9% growth in construction industry output and employment
Between 2016 and 2017, both the economic output and the number of full-time gainfully employed personnel grew by 8.9%, the study showed.
There was an increase of just over €200 million in the economic output generated by the construction industry; up to €2.56 billion in 2017 from €2.35 billion in 2016.
Similarly, the amount of people in full time employment within the industry had also increased by 8.9%; from 34,325 in 2016 up to 37,428 in 2017.
The study also found that the construction industry was the highest economic multiplier when compared with other industries, with an output multiplier of 1.704.
"The construction industry is the backbone of the Maltese economy; it is the industry which contributes most growth to the economy", MDA President Sandro Chetcuti said at the press conference.
"This success wasn't by coincidence - it came with a lot of work", he added. "With growth we need to keep our feet on the ground, as any mistakes that are made in this sector can have an effect on many people", the MDA President said.
It is clear that there is no property market bubble - Joseph Muscat
Prime Minister Joseph Muscat was pleased to have such a detailed study in hand reflecting the situation within this industry. He said that the most important point that had emerged for him was that there is no property market based on speculation or artificiality.
Another important point to note from this study, Muscat said was that there was an increase in prices which needed to be dealt with both through government policy and through self-regulation within the industry which has to realise that it is not about simply making a quick buck.
Muscat said that the 8.9% growth registered was impressive, but noted that it was not the biggest registered across the Maltese economy; a point which dispels the myth that economic growth is fuelled by an artificial construction industry.
Two important conclusions which Muscat felt he could draw from the study where that the economy has to remain diversified and that the country needs to keep bringing in new sectors, and that the study was proof that the way forward for the country is to continue with this sustained economic growth.
"The idea that we can somehow step on the brake pedal and say that we are satisfied with what we have is a fallacy; it only exists in story books", Muscat said.
This does create problems, he admitted; the question of affordability is "self-induced" and comes from higher property prices and higher demand, which is in turn caused from more people being in Malta which is needed because of the amount of investment being brought into the country.
"We need to maximise the good and mitigate the bad", Muscat said before adding that work on the new rental policy was in its final phase and also citing the government's measures on affordable housing.
Speculative demand, dependence on foreigners cited by operators as industry risks
Explaining viewpoints of industry operators in 2018, Pace noted that when it comes to pricing and affordability, operators had pinned a rise in the price of land as the biggest contributor to increasing property prices.
Operators had also commented, Pace said, that it remained a challenge to find workers - both skilled and unskilled - to work in the industry. It was especially challenging for operators to attract Maltese into the industry, and Pace said that some operators had suggested the creation of more campaigns to entice more Maltese into working into the sector. They also suggested more space and airtime be given to campaigns in vocational schools.
Pace spoke of managing the risks related to the property market, as cited by the operators. One of the points most commonly mentioned was that the market has become more dependent on foreigners living in Malta, meaning that sectors such as the financial services and gaming sectors are generating a demand for property. Therefore remaining relevant and attractive to these industries is also key for the property market, Pace said.
The level of speculative demand was felt to have increased, and this could create more risks in the market, Pace said before adding that this means that there needs to be more monitoring, especially in cases where there are aggressive levels of money borrowing.
Photos by Alenka Falzon