Property market booming

The year 2003 was the "best ever" for the property market, despite a 12 per cent increase in prices, according to leading estate agents.

The price rises are expected to continue this year, albeit at a much lower rate.

In an interview with The Times, four of the big estate agents - Dhalia, Frank Salt, Cassar & Cooper and Perry Real Estate - agreed that first-time buyers and those looking for cheaper properties now had no choice but to lower their expectations.

The estate agents welcomed the expected influx of new properties and rebutted claims that there would be an oversupply of upmarket properties.

A number of hotels and buildings are to be demolished to make way for upmarket apartments as projects like Portomaso, Cottonera and Tigné set new benchmarks in pricing. Tiny Malta is slowly being transformed into a haven for luxury apartments. And estate agents believe it is unlikely that such properties will remain vacant.

"The turnover is incredible. Just look at Tower Road, Sliema. It's practically impossible to find a property there. Now we congratulate negotiators when they get an agency for such apartments, never mind the sale," said Francis Spiteri Paris of Perry Real Estate.

As evidenced by the ever-increasing number of development permits granted by the Malta Environment and Planning Authority, the Maltese own more properties than ever. Suffice it to say that the number of permits nearly doubled in a decade (see table below).

A total of 43,526 properties worth Lm1,127 million have changed hands over the past four years, a figure more than double the value of property that had changed hands in the previous four.

Estate agents believe there are a number of reasons for the thriving property market.

The government's incentive for people to repatriate their money from overseas meant most of it was invested in property. Excessive liquidity on the market meant several people bought properties for speculative reasons.

In the meantime, lower bank interest rates have fuelled demand for mortgages.

Michael De Maria, of Cassar & Cooper, said there was a feel-good factor in the sector last year. "Despite an election and a referendum, when the property sector normally takes a back-seat, more and more sales were reported."

The problem is whether prices will remain affordable. Properties within the Lm30,000 to Lm40,000 bracket, more attractive for first-time buyers, are few and far between.

The primary aim of sellers was to make a very healthy profit, enough to overcome the five per cent stamp duty.

Mr Spiteri Paris thinks there will never be a drop in property prices.

One big myth was that estate agents were to blame for the increase in prices when it was the seller that determined it, Mr De Maria pointed out.

Joseph Lupi, director of Frank Salt Real Estate, said the market had to be careful not to out-price itself. In this respect an increase in supply would help stabilise prices.

It was high time for developers to start building smaller units, coupled with awareness among the young and newly-weds that they have to live in smaller spaces, he said.

The estate agents agreed that most younger people nowadays were reluctant to buy old apartments, which needed some touching up, especially in the inner harbour regions. Instead they were interested in areas like Sliema and Swieqi, where prices have trebled.

Developers also need to be given incentives to build, for example, more two-bedroom apartments rather than large three-bedroom flats. This is where Mepa should step in and grant permits for more floors, Mr Lupi said.

On a positive note, Dhalia manager Michael Mifsud noted that about four hotels in Bugibba would be demolished to make way for apartments which would easily cater for the lower income earners.

Mr De Maria is the only one who fears that a vast increase in luxury apartments could lead to overkill. One had to take into consideration that non-Maltese nationals can only own one property at a cost of not less than Lm30,000 for flats and not less than Lm50,000 for houses, he said. Foreigners would only be able to buy their second property after five years of residence.

But Mr Spiteri Paris believes the foreign market is still untapped as evidenced by the lack of response from foreigners when Malta participates in overseas property fairs.

The solution in this respect was to provide more upmarket properties in the hope of enticing those looking for a place in the sun.

"When foreigners come in to buy properties I have nothing to show them. Portomaso is sold, Tigné too. As of today, we have no exciting new development to show them."

Mr Spiteri Paris said the fact that Malta would become part of the EU in May signalled political stability, which meant that in four years' time, when the next election is expected, there would be no sudden jitters in the property market.

Mr Lupi welcomed the fact that buildings in Cottonera were being restored and selling at prices in the Lm100,000 region.

"If property prices are deflated this year it's not because the value of property has gone down but because people were asking too high a price first time round," Mr Lupi said.

Still, the estate agents envisaged that prices in general would go up by about five per cent this year.