Property statistics should become far more useful to policymakers in the coming months, thanks to various changes being made to improve the way they are collected.

As of July 1, the purchaser will need to fill in a form listing additional details such as the type of property, its surroundings, the level of finish, the amenities and the value. This will be submitted to the notary along with the contract, and will eventually be passed on to the Commissioner of Inland Revenue through the capital gains division.

Legal Notice 147/2015 tackles a number of changes which were required following the change in the tax on property made in the last Budget. In addition to the information required for fiscal purposes, however, the form to be filled by the purchaser will allow a more qualitative assessment of the property market, which was not possible until now.

Eurostat is well aware of the problems associated with property indexes, as each can capture part of the picture. For example, the gap between asking price and selling price “may provide an early indication of a change in the housing market”, it says in its guidelines.

The disadvantages of using data captured for administrative – rather than statistical – purposes are associated with definitions, coverage, quality and timeliness, which need to be balanced against compilation costs.

It also depends on what the statistics will be used for: to determine demand and supply; to monitor prices as a measure of economic activity; to assess social policy measures to help affordability; to pick up trends and measure risk exposure; and to assess property as an investment option, to name but a few.

The Notarial Council explained that at present, the public deed of sale only requires the price, location and a description.

“Therefore, the notary is not in a position to give any further details regarding the property (such as the finishings, the surroundings, the amenities, etc), simply because these are not recorded in the deed in the first place and the notary has no manner in which to establish these additional details,” council president Clinton Bellizzi said.

After publication of a deed transferring property, the notary presents a form to the Capital Transfer Duty (CTD) section of the Inland Revenue Department, for payment of the tax and duty collected on deed. The notary also presents a land registry plan duly marked by an architect indicating the superficial area of the property. So the additional form that becomes mandatory on July 1 will capture information that until now was not available – at least not in one place.

Eurostat fully supports information from the registry as it is very comprehensive – but it is not timely. This is usually overcome by having revisions once the data has been verified, something which happens more for property than for other economic sectors because of the time lag between a property going on the market and its actual sale.

Additional form that becomes mandatory on July 1 will capture information that until now was not available

For example, the National Statistics Office currently issues a report once a year, based on the figures from the CTD, as it believes that to do so any more frequently would be counterproductive, given the inevitable need for revisions.

A good example of the confusion that this can cause was the recent NSO report, issued through Eurostat, that prices had gone up by 11 per cent for the last quarter of 2014, calculated year-on-year – compared with the CBM’s report that prices had gone up by seven per cent overall, but 11 per cent for apartments.

Unfortunately, even more significant in the NSO report was the 29.2 per cent annual volume increase – compared with a decrease of 13.12 per cent a year before. However, there was not enough information in the report to explain this.

Keith Borg, who leads the price statistics directorate at the NSO, said that as from June 1, the NSO will report on the annual price and volume as well as the transaction value.

The White Paper soon to be issued to regulate real estate agents will also propose to make it mandatory for them to report transactions to the NSO, according to Douglas Salt, a council member of the Federation of Real Estate Agents.

However, the 90 estate agents on the islands only cover around two-thirds of the market, with sales also being brokered by lawyers and notaries, as well as by the old-style sensara, as well as through direct sale magazines, which would mean there is still incomplete information.

“The actual amount of transactions are not published – although they are estimated to be around 7,000-9,000 a year – so once the transaction value is known, we will be able to calculate the average transaction value,” one stakeholder said, declining to be identified.

“For example, this would help us to identify whether the increase in volume was due to the new block at Tigné and to sales connected with the citizenship scheme – or to the first-time buyer concessions boosting the lower end of the market...”

The information available from the new form will therefore be fundamental when it comes to analysing the sale of apartments – the least heterogeneous segment of the market, and also the largest, accounting for three out of every four transactions executed.

“We will be able to see whether the apartments that are selling are small first-time buyer ones or high-end penthouses. And we will know whether demand is slowing down in some localities but growing in others,” the source said.

If you underreported the price at which you bought, you will pay more capital gains when you sell at a higher price

The Central Bank of Malta is also trying to improve its statistics. It has traditionally compiled its index based on advertised prices, which Eurostat warns against, as properties could be withdrawn from the market or sold for a very different price to that originally asked for.

It is currently constructing a new index, which will use information drawn from mortgage loans from banks. The CBM said that it would be more detailed and would take into consideration differences in the quality of the property.

“This does not exclude that in the future, other data will not be used, if these are found to be robust and accurate,” it said, asked whether data from direct sales magazines and real estate agents would be taken into account.

“It is the aim of the CBM, the NSO and the Building Industry Consultative Council to work closely together to set up one property price index that would capture the best information on this very important sector. On its own, however, each of the indices can provide specialised information that would be useful for specific types of analysis,” it said.

The problem with the CBM’s plans is that not all property purchases require a mortgage and the ones that are not captured – even though a minority – might turn out to be quite significant, particularly when trying to capture data on properties bought by foreigners for cash, for example, or by barter.

The data captured will, of course, also depend on whether the vendor and buyer give true details about the price paid. The old system which gave the option of paying either capital gains tax or a final withholding tax (FWT) had greatly reduced the incentive to lie about the price – while the current system which is based on just the FWT could once again motivate the vendor to lie, according to a number of stakeholders contacted.

“If you underreported the price at which you bought, you will pay more capital gains when you sell at a higher price. With FWT, there is no longer the incentive to declare the actual buying price,” the sources said.