Maltese house prices have hit a slippery downward slope, potentially marking the definitive end of the 2003-2004 boom which saw prices zooming up, only to grind to a halt over 2006 and 2007.
A drop of 0.7 per cent in 2008's first quarter (compared to the same period last year) in the overall house price index possibly marks the start of the decline of property prices, according to figures released by the Central Bank of Malta.
According to the Global Property Guide, an international online property analysis site, when adjusted for inflation house prices actually fell by almost five per cent over the same period this year. The Central Bank said how finished flats and finished masionettes, composing more than half of sampled properties, saw drops of 4.5 per cent and 3.4 per cent respectively. This sharply contrasted the impressive price increase in 2004 and 2003, which saw the price index zooming up by double figure percentage increases.
Francis Spiteri Paris, director of estate agency Perry Ltd, said he cautiously disagreed that the house property market was beginning to decline. He said the current trend of "realistic growth" and the continuous rhythmic overall price increases on market sections which Perry Ltd deals in, indicated otherwise and that the current state of the market was a "healthy" one. Prices are "realistically going up," he said, saying that the time when the "prices were going up very fast, almost doubling," was now over, confirming that the house price boom of 2003/2004 is now behind us.
He disagreed with the Central Bank's quarterly review which said that the first quarter of 2008 was "marked by a reduction in the number of advertised listings". Mr Spiteri Paris said that "if the market wasn't good, people wouldn't be putting adverts in the paper, because it is expensive, and property magazines are getting cheaper by the dozen".
In 2005, the price boom had already started slowing down with price growth dropping heavily in the first quarter of the year. By last year, the overall house price index had effectively levelled out, with only a minimal increase in the second quarter which declined over the third quarter of the same year.
On the other hand, Joseph Lupi, managing director of Frank Salt Real Estate Ltd, said that: "I would not say that we had a house price boom". He explained how he believed it was "was more of a very active and healthy property market which came about due to a number of factors which had an impact on property prices". Like in any other market, he said, prices fluctuate depending on demand and supply.
Mr Lupi said that he "definitely do(es) not agree that the market hit the beginning of a decline". He said how there is still quite a lot of liquidity in the market and buyers are spoilt for choice, and that Frank Salt registered an increase in sales in the last couple of months. He stated how he believes "the local market is picking up very fast and we anticipate that by the end of the year we shall be seeing a different picture altogether".
Economist Gordon Cordina told The Times Business that he believed that "what we are seeing now, from a short-term perspective, is a period of re-adjustment, correcting the exceptional rises which were seen during the price boom".
"If this will bring with it a crash or not it is unknown. The only way to bring about a crash is to panic people into believing that a crash is on its way," he said, terming the prediction a self-fulfilling prophecy.
"The period of 2003 to 2004 was a period of fast growth which was related to exceptional circumstances," he said. "Factors which led to it were elevated market expectations due to EU accession and the euro adoption, as well as the fiscal amnesty which inflated the market when they were invested in property," Mr Cordina explained. The effects felt by these factors were also echoed by Mr Lupi, who added the 2003 general election into the equation.
The fiscal amnesty, called the investment registration scheme, lasted from September 2001 to June 2005. The amnesty was aimed at Maltese residents who had investments overseas, allowing them to "legalise" undeclared overseas assets without paying tax. The tax amnesty in particular, created an upward pressure on prices when the "legal" assets were then invested into Maltese property.
"Essentially," Dr Cordina repeated, "I believe that this is a period of re-adjustment to a period of fast price inflation." He added that "the economy is growing so, fundamentally, the income and wealth levels which sustain the market are stable as well".
House price inflation is slowing down on a global scale, a report published earlier this month by Knight Frank - one of the world's largest privately owned global property agency and consultancy - indicated, as much of continental Europe is seeing reduced or actually negative growth in the market. The downward trend is not absolute, however, as several locations in Asia and eastern Europe are still seeing rapid increase, the report shows.
Malta was among the 12 countries which showed negative growth with a 2.7 per cent negative growth on 2008's second quarter and a 2.5 per cent decrease over the same period of 2007. Its ranking did not change, however, from last year to this year, indicating that it has kept its place within the larger global context.
The downward trend is gaining in momentum in various countries, predominantly across Europe as Germany, Latvia, Denmark and the UK saw considerable price falls. Performance is varied however, as the report indicates that there is strong growth in Asia and eastern Europe, with countries such as Russia, Bulgaria, Slovakia, the Czech Republic, Hong Kong, Singapore, Cyprus and Colombia seeing growth rates in double figures.
Reacting to the Knight Frank report, Dr Cordina said that "one must be careful because in some countries, the property markets are closely tied to commercial price movements, meaning that they are closely tied to the country's economic cycle, more so than Malta".
"While it is reasonable that one links a global economic slowdown to a Maltese economic slowdown," Dr Cordina said, "it is also reasonable that one links an economic slowdown to a property slowdown." Despite this, he reiterated that "ultimately, a crash depends on the feelings and expectations of the market, and if it is expecting a crash or not".
"A crash for the country is very undesirable," he stressed, "as much of the country's wealth is invested in property, as well as being collateral for many bank loans. It is a situation which must be avoided at all costs."
A drop of 0.7 per cent in 2008's first quarter (compared to the same period last year) in the overall house price index possibly marks the start of the decline of property prices, according to figures released by the Central Bank of Malta.
According to the Global Property Guide, an international online property analysis site, when adjusted for inflation house prices actually fell by almost five per cent over the same period this year. The Central Bank said how finished flats and finished masionettes, composing more than half of sampled properties, saw drops of 4.5 per cent and 3.4 per cent respectively. This sharply contrasted the impressive price increase in 2004 and 2003, which saw the price index zooming up by double figure percentage increases.
Francis Spiteri Paris, director of estate agency Perry Ltd, said he cautiously disagreed that the house property market was beginning to decline. He said the current trend of "realistic growth" and the continuous rhythmic overall price increases on market sections which Perry Ltd deals in, indicated otherwise and that the current state of the market was a "healthy" one. Prices are "realistically going up," he said, saying that the time when the "prices were going up very fast, almost doubling," was now over, confirming that the house price boom of 2003/2004 is now behind us.
He disagreed with the Central Bank's quarterly review which said that the first quarter of 2008 was "marked by a reduction in the number of advertised listings". Mr Spiteri Paris said that "if the market wasn't good, people wouldn't be putting adverts in the paper, because it is expensive, and property magazines are getting cheaper by the dozen".
In 2005, the price boom had already started slowing down with price growth dropping heavily in the first quarter of the year. By last year, the overall house price index had effectively levelled out, with only a minimal increase in the second quarter which declined over the third quarter of the same year.
On the other hand, Joseph Lupi, managing director of Frank Salt Real Estate Ltd, said that: "I would not say that we had a house price boom". He explained how he believed it was "was more of a very active and healthy property market which came about due to a number of factors which had an impact on property prices". Like in any other market, he said, prices fluctuate depending on demand and supply.
Mr Lupi said that he "definitely do(es) not agree that the market hit the beginning of a decline". He said how there is still quite a lot of liquidity in the market and buyers are spoilt for choice, and that Frank Salt registered an increase in sales in the last couple of months. He stated how he believes "the local market is picking up very fast and we anticipate that by the end of the year we shall be seeing a different picture altogether".
Economist Gordon Cordina told The Times Business that he believed that "what we are seeing now, from a short-term perspective, is a period of re-adjustment, correcting the exceptional rises which were seen during the price boom".
"If this will bring with it a crash or not it is unknown. The only way to bring about a crash is to panic people into believing that a crash is on its way," he said, terming the prediction a self-fulfilling prophecy.
"The period of 2003 to 2004 was a period of fast growth which was related to exceptional circumstances," he said. "Factors which led to it were elevated market expectations due to EU accession and the euro adoption, as well as the fiscal amnesty which inflated the market when they were invested in property," Mr Cordina explained. The effects felt by these factors were also echoed by Mr Lupi, who added the 2003 general election into the equation.
The fiscal amnesty, called the investment registration scheme, lasted from September 2001 to June 2005. The amnesty was aimed at Maltese residents who had investments overseas, allowing them to "legalise" undeclared overseas assets without paying tax. The tax amnesty in particular, created an upward pressure on prices when the "legal" assets were then invested into Maltese property.
"Essentially," Dr Cordina repeated, "I believe that this is a period of re-adjustment to a period of fast price inflation." He added that "the economy is growing so, fundamentally, the income and wealth levels which sustain the market are stable as well".
House price inflation is slowing down on a global scale, a report published earlier this month by Knight Frank - one of the world's largest privately owned global property agency and consultancy - indicated, as much of continental Europe is seeing reduced or actually negative growth in the market. The downward trend is not absolute, however, as several locations in Asia and eastern Europe are still seeing rapid increase, the report shows.
Malta was among the 12 countries which showed negative growth with a 2.7 per cent negative growth on 2008's second quarter and a 2.5 per cent decrease over the same period of 2007. Its ranking did not change, however, from last year to this year, indicating that it has kept its place within the larger global context.
The downward trend is gaining in momentum in various countries, predominantly across Europe as Germany, Latvia, Denmark and the UK saw considerable price falls. Performance is varied however, as the report indicates that there is strong growth in Asia and eastern Europe, with countries such as Russia, Bulgaria, Slovakia, the Czech Republic, Hong Kong, Singapore, Cyprus and Colombia seeing growth rates in double figures.
Reacting to the Knight Frank report, Dr Cordina said that "one must be careful because in some countries, the property markets are closely tied to commercial price movements, meaning that they are closely tied to the country's economic cycle, more so than Malta".
"While it is reasonable that one links a global economic slowdown to a Maltese economic slowdown," Dr Cordina said, "it is also reasonable that one links an economic slowdown to a property slowdown." Despite this, he reiterated that "ultimately, a crash depends on the feelings and expectations of the market, and if it is expecting a crash or not".
"A crash for the country is very undesirable," he stressed, "as much of the country's wealth is invested in property, as well as being collateral for many bank loans. It is a situation which must be avoided at all costs."