Property deals down 9%

Promise-of-sale agreements for the first quarter of the year are down nine per cent, The Sunday Times has learnt.

Just over 1,800 agreements (konvenji) were signed in the first three months compared with 1,931 last year - and no less than 40 per cent down on the same period in 2007.

Promise-of-sale agreements are normally seen as a good indicator of a market, which has proved to be lucrative for many years. But after the property boom, where hundreds of houses were demolished to make way for small apartments, many are feeling the pinch.

Notary Roland Wadge said the economic situation had also led to more promise-of-sale agreements falling through. This was the general feeling among many notaries, he said.

"There might be different reasons for this but there is certainly an aspect of job security. The recession in this sector started before the credit crunch. Let's not forget that there are too many apartments nowadays and the bubble has burst for many developers - today everybody seems to have become a developer," Dr Wadge said.

Sandro Chetcuti, president of the GRTU's property development division, believes the government should intervene to boost demand and treat the "disease".

"People will invest when there is a feel-good factor. But businesses are suffering, investment funds are down, capital gains tax remains among the highest in Europe, and the only surplus cash is going to the excessive water and electricity bills," he said.

While agreeing that there is an oversupply in the market - Malta has over 70,000 vacant properties - Mr Chetcuti said this was an opportunity for prices to go down.

He reiterated the GRTU's recommendation to government to stop building social housing units and instead buy from the private sector.

Mr Chetcuti said: "Property remains the best investment and it's up to government to help reduce this apathy. It should eliminate stamp duty for property under a certain threshold and do its utmost to lure foreigners to buy."

He said apartments in a recently-built complex in Sliema were selling at some €82,000, well below the original asking price of €151,000.

According to the Central Bank's annual review, the advertised residential property prices indicated an average decline of 2.7 per cent during 2008.

Advertised prices for flats in both shell and finished form, which together make up over half of the sample, were down by two per cent and 5.4 per cent respectively, while those for villas and terraced houses declined by 3.7 per cent and 1.8 per cent.

On the other hand, higher prices were asked for maisonettes in shell form and townhouses. Prices of finished maisonettes and houses of character changed little from 2007.

House prices were falling in practically every European market by the end of 2008 when adjusted for inflation, according to the Royal Institution of Chartered Surveyors.

House prices may be dropping across Europe, but the strength of the euro has put British buyers off destinations which use the euro, such as Malta.

According to the Global Property Guide, Malta's property sector ranks 28th out of the 40 European countries surveyed for economic competitiveness.

But there may be a sign of some light at the end of the tunnel - Dr Wadge said business seemed to have picked up in the last month or so. It remains to be seen whether the global downturn could prove to be a blessing for prospective buyers who have been faced with unaffordable properties for years.