The price of property in the last half of 2008 continued to slide, following the downward trend of previous months, the Central Bank said in its quarterly review.
In the last three months of 2008, house prices dropped by 4.4 per cent.
Prices of finished flats, the most common on the market, were down by 5.5 per cent on the same period the previous year. The largest reductions, of 9.6 per cent and 9.1 per cent, were reported for villas and maisonettes in shell form.
Prices rose in two categories: finished maisonettes and townhouses. The price of the latter, which makes up for six per cent of the market, reported a sharp rise in the quarter under review.
According to the bank's property price indicator, there was an annual decline of 3.2 per cent in advertised prices after those for the first and second quarters of 2008, a drop of 0.7 and 2.7 per cent respectively.
In its review, the bank observed that the worsening economic conditions overseas posed downside risks to economic growth in Malta. However, monetary policy has been eased considerably and this should counter the adverse effects of the international financial crisis on the real economy.
The bank noted that, in the final quarter of the year, as the economic outlook deteriorated sharply and inflationary pressures receded, the European Central Bank lowered the interest rate on the main refinancing operations on three occasions, for a cumulative drop of 175 basis points, bringing it down to 2.5 per cent by the end of the year.
Moreover, on January 15, the ECB cut the rate by another half a percentage point as the economic outlook weakened further and inflationary pressures continued to diminish.
In the third quarter, the country's economy continued to expand, albeit at a slower pace. The annual rate of growth of real GDP stood at 2.2 per cent, down from 3.5 per cent in the second quarter.
Developments in the labour market remained generally positive, with increases in the number of the gainfully occupied and a further reduction in the unemployment rate.
The full text of the review is available on the bank's website at www.centralbankmalta.org.