There were 1,354 final deeds of sale relating to residential property last month and this works out at 205 more than the same month last year.
This is good news in the ears of any property negotiator and one that breaks the mould that Covid has wreaked havoc in all sectors of the economy. The value of the final deeds, the NSO said, totalled €290.5m, 36.4% higher than the value recorded in July 2020. However, the rally in property sales is not reflected by positive news in the rental market.
Rental prices have declined by 11%, as owners of Airbnb rentals have switched to offering long-term rentals, adding supply into that market. Be that as it may, one appreciates the publication of a Djar report in conjunction with EY.
This edition of the Djar report includes analysis of specific trends within Djar's database within this context of property transactions. Besides the analyses of average changes in asking prices and rates per square metre, this quarterly edition presents an analysis of market supply, extracted from both Djar's database and public information.
This report gives an analysis of asking prices for various types of commercial property, with a more detailed focus on retail properties. The seminal report is detailed and is worth studying. Starting in April, the NSO issued the first Residential Property Transactions publication.
This data enriched the publication of Djar's study enabling the listing and comparing of national promise of sale and final deed data, starting from 2018 Q1. These two data points represent a measure of market activity levels, that is, transactions that are the realisation of both demand and supply. It also indicates a strong resurgence in market activity following the slump in 2020 Q2.
As announced in the report, it affirms how final deeds of sale levels have returned to pre-2019 figures. This observation could be reflecting "pent-up" activity that had been stalled during the Covid restrictions. It is also likely to be an outcome of demand-boosting policies over this period.
Overall, the data analysis indicates a re-surging market supply reflecting incoming supply from the development pipeline following rising development permits over 2015-2019, as well as pent-up activity which had been stalled over the Covid onset months.
Recorded increases in market activity (promises of sale and deeds) shows that corresponding market demand is also present, on the back of government tax measures to stimulating/incentivising the property market. Alas, there is a fly in the ointment since Moody's confirmed an A2 stable rating, but has revised downwards its outlook to negative from stable.
The significant increase in Malta's government debt burden, the addition of Malta to the "grey list" by the international anti-money laundering group as well as the risks to the post-pandemic recovery of the economy are the key drivers behind the negative outlook.
It does not rain but it pours in this respect; the IMF report did not sugar its criticism saying that while new fiscal buffers were built yet economic growth has in the past relied on large inflows of foreign labour (mostly repatriated during Covid), which augmented the pressure on the island's housing, infrastructure and natural resource management. Can the post-Covid economy be a harbinger of a new wave of gentrification which will slowly push up domestic rental values? Party apologists wax lyrical that prior to the abrupt resignation of Joseph Muscat as prime minister, those were the "best times ever" when plebs cherished the claim that we were the best in Europe.
Many threw caution to the wind and feted in restaurants and pubs while champagne flowed generously in corporate parties. In reality, pragmatists warn that during the "l-Aqwa Zmien" the disparity between the fat cats (sporting Ferraris, skiing holidays or sipping aged single malts on expensive yachts) and the working classes was getting wider (a rise in inequality). This golden period had registered an extraordinary growth prior to the onset of the pandemic.
The IMF is chasing us to address our weaknesses but really and truly as they say, Rome was not built in a day. None can dispute that lockdowns, curfews and the severe drop of tourists during the pandemic's 16 months has resulted in an unprecedented fiscal deficit. This deficit exacerbated the ineffectiveness of the elusive trickle-down mechanism caused mainly by the unprecedented cost of rescuing faltering firms and the expense of furlough schemes.
The anomaly is that while Malta Enterprise recalls saving 100,000 furlough jobs (practically 50% of non-State employees) yet following the resumption of the tourist season in June, most firms are complaining of staff shortages. Certainly the maths does not add up.
One considers this an enigma since if most workers were protected by furlough schemes and those currently registering for work fell to 1,600, then one cannot justify a shortage of workers. Another topic is the need to combat rises in cost of living particularly for low-income and pensioners. Now, in the shadow of another annual budget, there is a general feeling that the statutory two-thirds capped pension mechanism unless supplemented by external income is not sufficient to help people from sliding into the poverty trap.
To analyse this issue, PKF designed a number of "one-to-one" questionnaires and ran a confidential survey among residents in old people's homes housed in three government-run centres. Not surprisingly, when one breaks up this data by age group or household type, one finds that the above mentioned "feel good factor" has not benefited everyone at the same rate.
A foregone conclusion, which is prevalent, is that people are living longer and by 2030, the number within the 65 years plus group will exceed that of young people aged 15 to 24. This inexorably shows how society is getting older and will inevitably face challenges in planning their retirement nest egg.
In conclusion, the fiscal deficit is expected to increase further this year to 12.4% of GDP, the highest in the EU on current projections. Coupled with Moody's expectations for a relatively subdued economic recovery this year, the promise of the finance minister not to raise new taxes will be sweet music in the ears of many.
George Mangion is a senior partner of an audit and consultancy firm and has over 25 years' experience in accounting, taxation, financial and consultancy services. His efforts have seen that PKF has been instrumental in establishing many companies in Malta and placed PKF in the forefront as professional financial service providers on the island.
George M. Mangion
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