Claudia Calleja
Property prices getting more 'realistic'
Fancy buying a three bedroom terraced house with a garage in central Naxxar for just €85,000?
Sounds like a bargain, right? Pity the house was advertised in the property pages this time 10 years ago, at Lm36,500.
Since then its value has more than tripled and reached about €257,000 last year. If you are a buyer, the good news is that property prices, which rocketed in the past decade, have been gradually declining.
A browse through The Times' own classified adverts shows that, right now, the Naxxar house would be advertised for about €244,000.
This declining trend has been highlighted in the Central Bank's quarterly review which shows an ever slowing property market in 2008.
The bank's property price indicator showed an annual decline of 3.2 per cent in advertised prices in the third quarter, following a slump of 0.7 per cent and 2.7 per cent in the previous two quarters of 2008, while data for the fourth quarter reveal a further drop of 4.4 per cent in house prices.
Estate agents are still hopeful. Many property negotiators said they have been noticing this drop in prices but some pointed out that the 4.4 per cent dip was not really significant, adding that reducing €4,000 on a €100,000 property was "barely felt".
One agent actually said he was glad prices were finally settling into "realistic" figures since, in the past years, home owners have been hiking up prices to ridiculous amounts.
"Thank God this price dip is happening. What's actually happening is a correction in people's attitude. People were out-pricing themselves and expecting ridiculously high prices," he said.
But wouldn't property negotiators benefit from high prices, since they translate into higher commissions? One agent argued the contrary, explaining that it was easier and quicker for an agent to sell if the price was reasonable and affordable.
Another agent added that in the past year or two, owners and developers were more willing to reduce their prices to sell. "It's definitely becoming more of a buyers' market," he said.
Veteran property negotiator Frank Salt agreed that prices now are more realistic and that, the current situation is a plus for buyers.
"There will always be those who are desperate to sell but I think most people can afford to wait to sell their property and let it go at a reasonable asking price," he said.
Having said that, he added, right now it is a buyer's market as buyers have a larger selection to choose from within their budget and banks are offering low interest rates.
Mr Salt cautioned buyers not to go beyond their budget and to be aware that a rise in bank interest rates could stretch them beyond their means.
This cautionary note also resonated in the Central Bank's quarterly review that points out that the construction, mortgage and property development sectors accounted for over 50 per cent of total loans issued by local banks last year.
"Recent international experience shows that strong increases in property prices fuelled by rapid growth in credit are unsustainable. House prices cannot rise faster than incomes indefinitely. Otherwise, housing simply becomes unaffordable...
"While domestic banks have been more prudent than banks abroad, however, the continuing high dependence on property as a driver of credit growth, and as collateral for other lending, remains a source of risk," the review warned.
When comparing advertised property prices, the Central Bank's review found that in the third quarter of last year lower prices were noticed in six of the eight property-types. Prices of finished flats, the most common type, dropped by 5.5 per cent from the previous year, though the largest reductions, of 9.6 per cent and 9.1 per cent, respectively, were reported for villas and maisonettes in shell form. Prices rose for maisonettes in finished form and town houses.
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B..M. Reece
Feb 22nd 2009, 15:02
i suppose now is the time to start advertising through these blogs free of charge what a great and a fantastic idea. Free ads for all, but first they must also print the actual price in full and no hidden extras ie. computer generated pictures to make them looke like paradise, and when we check out these properties we find that they are completly different and in a bad state or find that the in most cases some empty properties are much older then what the photo print shows. Please be honest that way there will be no time wasters. Yes?
Brad.Reeceis
derek bugeja
Feb 22nd 2009, 11:22
now that the property prices are becoming reasonable one can find some good bargains especially if you buy directly from owner.. the following is a perfect example http://marsalforn09.wordpress.com/
A.Church
Feb 21st 2009, 09:29
What it actually boils that to is that the boom days for the property market and speculators is now over and passed it sell by date, i think maybe just like most eu countries Brussels will have something to say as usual new rules and regualtions are emerging by the hour and the days of the big fat cats profeetering from ordinary working man has now reached its limit, as the saying goes>What goes up must come down< only the other week i had a tax form to fill in from my homeland requesting me to fill in ay details of any properties i might have invested in in Malta or outside my country beside oweing my own property back home, but thankgod not me i'm not that stupid thats why i only rent and spend my money before i kick it, why should i leave it for the government so he could maybe send me a thankyou letter for the money i invested in a country outside my own, no siree. i've seen all before.:i'm here to-day and gone to-morrow! Alan.C
H.Tarr
Feb 20th 2009, 20:55
I like these various comments on the Times, one always live and learn and i certainly have learned alot in the last few weeks from such comments and saved me from rushing into things head first, this way isaved myself alot of problems for the forseeing future * Well done Times of Malta for providing a welcomed service for the good of the general public.
Thanks for your service. Harry Tarr. (UK and Malta)
Adrian Camilleri
Feb 20th 2009, 15:19
OK V Farrugia. Now we're on the same wavelength.
If you absolutely had to leave your parents house and were a first time buyer then the market DID screw you and many others. The argument you make is a reasonable one and borne of the frustration you must feel at having the market rob you of equity in your house. Fair enough.
Your initial post made it sound like you were pissed because you wouldn't be able to sell your house at a profit like you'd always planned and there's very little sympathy for property speculators on this forum.
The bad news is that there's very little that the government can do for you because of 'moral hazard'. This is the concept whereby if the government starts protecting people from their own poor decisions or because they made a financial choice that turned out to be unprofitable then the market (and let's not kid ourselves, property IS a market) wouldn't work.
http://en.wikipedia.org/wiki/Moral_hazard
I'm intrigued though. Did you see the property crash coming ? Why did you buy a house of character as your first house ?
M.Green
Feb 20th 2009, 15:17
I still say play it be ear before buying such properties especially in Malta and Gozo with all hidden extras especially for us outsiders, my motto is if one ownes a property in the UK, and wish to retire say in your country, its wise to rent and see how the situation developes , cause believe you me i know of many of my fellow country men who wished they never invested in such properties outside the UK, we we know its easy to part with your cash but try and sell especially in Malta and Spain where they have ampteen properties for sale but alas no one is buying untill such time or when ever things get back to normal. I for one don't think that the previous boom is going to be repeated somehow unless a miracle happens and even then it will be treated with caution., and many of my country folk i garantee will not be rushing to buy any such properties in Malta or Gozo when the property markets in England are a absoluite standstill and people are just holding on till the bottom drops. May Green (wish i never invested)
peter Aquilina
Feb 20th 2009, 14:21
The dream is over...... the illusion short-lived !!
Perhaps the once-upon-a-time "great illusionist" can come out with, (this time advising), another grand illusion, only that it cannot be referred again to the" many foreigners ( mostly from E.U. member states) who are going to buy so much property in Malta" ! .......cannot be referred to the "property boom" !
Maybe that now many people do "realize" the "boom" , or rather should I say mirage ?!!
Whatever it may be called, the fact remains that the "System/ Machine" ripped off the average man in the street , despite his or her average or low income !
V Farrugia
Feb 20th 2009, 13:55
No one forced me to buy a place, but I had to find a place to live in... and with lets going at the same price as a mortgage, letting is not an option really. I bought a small house of character, to live in, at an inflated price, when converting in into a habitable place is costing me an arm and a leg... But I suppose it's all my fault after all, I should have remained at Daddy's house until the property prices fell, no?! If I had seen the property crash coming, I would have waited another year, but unfortunately I didn't foresee the future.
I want my house as my home, my quibble with its value is that my mortgage will cost more than the house in itself. What will happen if in this economy I lose my job and I can't pay the mortgage? The bank confiscates my house, and since the house is worth less than the mortgage, I'll still owe the bank... nice one, eh? I don't intend to sell in the foreseeable future, but noone can guarantee employment for life, either. That's my concern.
Karl Abela
Feb 20th 2009, 13:30
As with any other product on the market, property prices are affected by demand.
In the past decade, Banks created the demand by competing against each other on who gives the biggest home loan ....
Hence property prices increased because people simply bought what was offered to them.
D Vella
Feb 20th 2009, 13:22
About time too . . . our property prices were nothing short of extortionate!
Adrian Camilleri
Feb 20th 2009, 13:04
Nice one V Farrugia.
Why should I have to pay a mortgage on a property that is now worth less that the mortgage I'm paying on it. Its downright unfair. This whole market economy thing isn't working out for me. I want the government to protect me from my poor investment decisions. I never really thought of my house as a home - it was an investment and I expected a healthy return. I was told that the price of property would always go up. Now that prices are down I want a bailout.
Don't you just love it when reality intrudes on the deluded aspirations of people who think of their life in terms of assets and liabilities ?
Anyone who buys a house as an investment and thinks of it as such should be aware that the value of investments can go down as well as up. Those of us who buy houses as homes may well be disappointed at the decrease in value of the property itself, however, we have a roof over our heads and that's all we ever wanted or expected.
Andy Towler
Feb 20th 2009, 12:31
@ V Farrugia: yes, you do. That's the way of the world. You made the decision to buy your property at whatwever price it was, no-one forced you.
Kevin Zammit
Feb 20th 2009, 12:08
@V Farrugia
What do you expect? that you're compensated now for the loss? Fair enough we're all entitled to our opinion ... if you make a paper gain then you should be ok with paying a tax on it like what happens in Italy then?
Charles Muscat
Feb 20th 2009, 11:21
V. Farrugia is absolutly wrong. Did you buy the house to live in or to con someone else? To make a profit from shares it is a long term investment like buying a house. It should take 10 years to see real profit. If you are expecting profit in the short term you are a wrong.
ceri whitley
Feb 20th 2009, 11:06
Negative equity - where the value of the property drops below the amount of your mortgage (because of a fall in property values) is a high probability.
In these cases, and this is most likely to apply to those who have recently bought a shell form flat or maisonette for example, will mean that if these unfortunate people who wish to sell will still owe the banks money if they sell for less than the mortgage borrowed.
Houses of Character, which are 'niche market' properties whose character obviously cannot be built new by a developer, will remain desirable if they retain their original architectural features.
With more bland flats/maisonettes being built the unique properties become more exclusive and therefore more desirable.
V Farrugia
Feb 20th 2009, 09:55
What about houses of character? Has their price gone up or down, or is it stable?
What about those of us who bought a property at an inflated price? Do we have to be saddled with a loss or with a mortgage that costs far more than the price of our property?