Are we burying our heads in the sands?
The view of real estate agents and developers are, perhaps predictably upbeat. A source from outside the industry, who is nonetheless familiar with the real estate market, said that a constructive debate on the topic cannot really be undertaken without...
The view of real estate agents and developers are, perhaps predictably upbeat. A source from outside the industry, who is nonetheless familiar with the real estate market, said that a constructive debate on the topic cannot really be undertaken without more information.
He felt that a serious debate requires far more information and asked a number of pertinent questions:
How many of the unoccupied dwellings are owned by property developers who are holding the property for resale?
To what extent are the unoccupied dwellings owned by developers burdened with debt. The level of debt could be a determining factor.
How many units are held by property owners for long-term investment without any associated debt?
How many new units are expected to come on stream?
From my point of view, Malta is undoubtedly facing a real threat of oversupply of property. The writing on the wall is becoming evident with an increasing number of developers either slowing down the pace of supply and/or reducing their expected selling prices (especially in areas where the supply of units has been exceeding demand) for a number of years.
Banks are also realigning their lending strategies in order to reduce their lending to property developers. However, this is not true across the board and a number of properties in a number of areas are apparently still enjoying strong demand and performance.
The present phenomenon is not an overnight occurrence but something which has been progressively building up.
In my opinion, the issues relating to this debate are in many respects being oversimplified and many predictions being made are clearly sensationalistic and in many respects oversimplistic.
Serious debate on the topic must take the following matters into consideration:
1. The economic realities hinge on the basic economic theories of supply and demand and what impact their interaction will have on price. Clearly sweeping statements not supported by real market research cannot give the correct conclusions.
2. Demand for property in Malta is driven by residential requirement and/or investment motive. People often reach conclusions on the property market by assuming that all unoccupied property is effectively on the market and that the owners are keenly seeking to sell or rent the property.
In reality many property owners are not really keen potential sellers but are investors who are more than happy to just sit on the property and believe that in so doing the long-term value of their asset will increase. This investment motive is often overlooked.
3. Properties held for investment purposes could account for a large number of unoccupied dwellings. If this is the case, then it is unlikely that the price of property will be impacted by the simple fact that demand exceeds supply. Many owners are holding on to their property for the long-term and will not be willing to sell the property at below their expected value... the gap between real demand and supply may thus be very different from what first meets the eye.
He felt that a serious debate requires far more information and asked a number of pertinent questions:
How many of the unoccupied dwellings are owned by property developers who are holding the property for resale?
To what extent are the unoccupied dwellings owned by developers burdened with debt. The level of debt could be a determining factor.
How many units are held by property owners for long-term investment without any associated debt?
How many new units are expected to come on stream?
From my point of view, Malta is undoubtedly facing a real threat of oversupply of property. The writing on the wall is becoming evident with an increasing number of developers either slowing down the pace of supply and/or reducing their expected selling prices (especially in areas where the supply of units has been exceeding demand) for a number of years.
Banks are also realigning their lending strategies in order to reduce their lending to property developers. However, this is not true across the board and a number of properties in a number of areas are apparently still enjoying strong demand and performance.
The present phenomenon is not an overnight occurrence but something which has been progressively building up.
In my opinion, the issues relating to this debate are in many respects being oversimplified and many predictions being made are clearly sensationalistic and in many respects oversimplistic.
Serious debate on the topic must take the following matters into consideration:
1. The economic realities hinge on the basic economic theories of supply and demand and what impact their interaction will have on price. Clearly sweeping statements not supported by real market research cannot give the correct conclusions.
2. Demand for property in Malta is driven by residential requirement and/or investment motive. People often reach conclusions on the property market by assuming that all unoccupied property is effectively on the market and that the owners are keenly seeking to sell or rent the property.
In reality many property owners are not really keen potential sellers but are investors who are more than happy to just sit on the property and believe that in so doing the long-term value of their asset will increase. This investment motive is often overlooked.
3. Properties held for investment purposes could account for a large number of unoccupied dwellings. If this is the case, then it is unlikely that the price of property will be impacted by the simple fact that demand exceeds supply. Many owners are holding on to their property for the long-term and will not be willing to sell the property at below their expected value... the gap between real demand and supply may thus be very different from what first meets the eye.