2002 Good year for the property market

The property market in the past year can be described as a solid one, in which realistic budgets found properties to suit buyers' requirements. It was not a sellers' market in which owners of property could dictate prices and buyers paid the figures asked. But it was neither a buyers' market, which offered numerous bargains and property sold at rock-bottom prices.

However, it must be said that overall, 2002 was a good year for the property market. Property turnover registered an overall increase in all sectors, especially in up-market property, where the market has seen substantial increases. This movement of up-market property is probably due to increased availability.

Apart from Portomaso, which continued to register new sales in 2002, the Cottonera Waterfront Group apartments and more recently the Midi Project, have added to the supply of blue chip properties. The sale of these properties averaging Lm150,000 each can be attributed to the lack of investment opportunities in the equity market and the success of recent overseas funds repatriation scheme, a substantial part of which have been reinvested in property.

The biggest movers in the property market in 2002, as has been over the past years, were flats and maisonettes. In terms of units sold, flats experienced the highest levels. This is expected in a country like Malta where land is scarce and the days of large families are on the decline.

Social trends are also changing and younger people are moving out of the family home earlier, not because they are getting married but to try out independence and get on the property ladder. Not so long ago this phenomenon was unheard of, but now the stigma seems to have faded away. Houses of character also sold well in 2002, but the market segment is decreasing as obviously they are no longer being built. Meanwhile a number of the best ones have been sold and are coming back on the market converted and at a much higher price.

The banks and the availability of tailor-made property loan schemes have also ensured a high degree of property turnover in the market over the past year. Through such loan schemes the banks have made it possible for first-time buyers to start their journey on the property ladder.

The future

The prices of property in Malta, like any other investment, will depend mainly on the supply and demand factor and as long as there is a demand prices will not decrease. The structure plan for the Maltese Islands has restricted the land available for building purposes, thus avoiding haphazard planning, with the result that the price of land has gone up and will continue to rise as land becomes scarcer.

There is also the historical confidence that property is a sound and solid investment. Many individuals in Malta prefer investing in property rather than equities or any other type of investment, thus enhancing the demand for property, and pushing prices up over the years. The quality finishes, value-added services and amenities that buyers now expect, also contribute towards the upward trend of property prices.

EU accession

Malta's accession to the European Union is not expected to have a major impact on property prices. Following the derogation obtained by Government in its negotiations with the EU, little has changed in terms of existing conditions for EU citizens purchasing property in Malta. The same restrictions which limit foreigners to own just one property Lm30,000 for flats and Lm50,000 for houses still apply in the case of EU citizens purchasing their secondary residence in Malta.

These thresholds have been removed in the case of the purchase of property for primary residence purposes. However the latter are still limited to purchase only one property and can only purchase more if they have been residing on the island for more than five years.

EU citizens may still purchase an unlimited number of properties in specially designated areas (normally major projects). A major benefit is that EU citizens would be able to place any property owned locally on the local rental market, and thus earn investment income besides the usual capital appreciation.

Andrew Gatt is operations director at Dhalia