Re/Max Malta managing director Kevin Buttigieg.

There is such a demand for property that almost dormant practices like buying on plan are seeing a revival, Re/Max Malta managing director Kevin Buttigieg said.

“I never thought I would see selling on plan coming back into use! But we just sold four blocks in Sliema as soon as the permit was issued – the owner hasn’t even started digging the foundations. That is how crazy it is.

“It is great for the buyer as they pay roughly 10-15 per cent less if they can put down 10 per cent of total. And, of course, those able to put down more can negotiate a better discount.

“It helps developers with their cash flow and leverage, and represents considerable saving on financing costs. They want the money to get on with new developments. The real estate market is the strongest it has been in 30 years,” he said.

The demand for property for both rental and sale means that as the favourite hotspots run out of candidates, other areas start to pick up.

“And projects in certain areas are making them more attractive. For example, the south has started to explode because of Skyparks and Smart City as people – local and foreign – want to live close to where they work,” he said.

Never one to sit still, Mr Buttigieg and his brother Jeff are even more out of breath than normal for this time of year. By the end of June, Re/Max had already hit the €200 million work – almost in line with full year sales last year of €237 million. And with promises of sale up 70 per cent, Mr Buttigieg is very pleased indeed with the forecasts.

“My target is €450 million worth of sales – and that is just short of the half billion mark,” he said, nearly bouncing in his chair.

“And our letting department should be up by 35-40 per cent more than in 2014. Compared to the rest of Europe, residential rentals are getting a return of 4-8.5 per cent return while commercial rentals are getting from five per cent to as high as 11 per cent, which is phenomenal. Not to mention the capital appreciation, which depends on where and what you buy – and how it is finished.”

Indeed, he stressed that quality has become a key factor, for both Maltese and foreigners, and for anything from a €90,000 apartment to a €5 million villa.

“It has improved tremendously, but we still need to see more. The projects we are seeing nowadays, for instance the Q1 units at Tigné Point and the Fort Cambridge common parts are all very nicely done. And the new two-storey development by architect Ray Demicoli at Portomaso is unique. In fact, it was sold out even before it was officially launched,” he said.

And it is not just on the finishing that expectations are rising but also on size: “For an upmarket one bedroom people expect over 60 sq.m. – even up to 100 sq.m, while for a two-bedroom apartment it has to be over 100 sq.m., and for a three bedroom 220 sq.m. and over.”

Another trend he has noticed relates to office buildings. Some businesses which own their own offices have sold the property for 80-90 per cent of the value, releasing liquidity they need to grow their companies’ operations. They then rent back the property and retain the right to buy it back in a few years, for a pre-agreed capital appreciation.

“The market is so buoyant that we are seeing all sorts of transactions now. It is a good sign,” he said, adding that premium properties offer attract so many potential tenants that they have started to try to outbid each other – a common practice overseas but not in Malta.

“At least promise of sale is as sound as a contract – and defaults are very, very rare, at least so far,” he said.

Residential demand is being met by casting the net wider across Malta but with office space it is not that easy. There are several new projects that will be coming online in the next few years – the Spinola Bay development, the new high-rise building in Mrieħel, the Farsons Business park, to name but a few – but that is already going to be too late for some companies.

An aerial shot of Tigné, Sliema.

“We usually manage to find a solution if a company needs 2,000 sq.m. of office space, but those who want 6,000-8,000 sq.m. will need to wait until end 2016 or end 2017.

“Some companies could not wait and have gone to other countries but there is a constant stream of new enquiries and many companies that are already here are growing and moving to bigger and bigger premises, vacating space for new ones,” he said.

The old system of the sensara just does not make sense and should be abolished

There has been a tremendous surge in rentals as expatriates move to Malta to work or live. But Re/Max believe that many of these could be persuaded to buy ­– and is actually planning a series of seminars on the topic. Success, however, would in turn cause more problems, especially for the ultra high net worth individuals now coming to Malta through the citizenship scheme.

“They are not finding what they want. We have not managed to persuade Maltese developers of this, although we were more successful with foreign investors. For example, there are some who bought a large plot and instead of squeezing four villas on to it will build one massive villa... They really believe that they will get a good return on their money – and I agree with them,” he said.

There has been a surge in rentals as expatriates move to Malta to work or live.

“At the moment, the Individual Investor Programme (IIP) applicants are renting but we believe that once they get used to Malta and settle in, say within six to eight months, another 10 to 15 per cent of them will want to buy. People of that calibre love Malta or hate it. I predict that 70-80 per cent of them will love it.”

Government policies have provided incentives for many sectors, not just prospective citizens. For example, the first-time buyer scheme which ended in June also contributed in no small way to Re/Max’s results – and Mr Buttigieg confirmed that the Federation of Estate Agents is encouraging the government to come up with another property scheme in the next Budget.

The government also has the last word over another factor that could have a major impact on the sector: an airstrip in Gozo.

“Gozo would be a haven for IIP clients – as soon as the airstrip for private jets is available. It has to happen and when it does, Gozo will go crazy. Prices in Gozo have already started going up. This is partly because the fad of buying houses in Sicily has also run its course as there were enough horror stories to put people off,” he said.

With all this activity, the sector has a few horror stories of its own. The real estate agents are anxious to self-regulate and Re/Max was among the first agencies to start pushing for this reform, along with the Federation of Real Estate Agents. A White Paper is due to be issued by the government for consultation, which would propose the licensing of property negotiators, with a mandatory exam.

Although the details are not yet known, Mr Buttigieg quite openly stated that he hoped the White Paper would wipe out the traditional introducer or intermediary – sensara (see related story on page 3).

“The old system of the sensara, in my opinion, just does not make sense and should be abolished. If I meet you in the street and give you directions to a house that is for sale, in theory I could ask you for an introduction commission! That is what the law allows...” he fumed.

“I don’t mind being harsh. They can all go to hell! Sensara do nothing for the government because many do not pay tax. They are a menace to professionals as they do not give any service to their clients. Most do not even have a back-up office. I acknowledge that some are trying to set up an office – but at that stage they are no longer sensara but real estate agents. And they simply could not afford to charge just one per cent and one per cent [from the vendor and buyer] if they wanted to offer any kind of infrastructure like an office, website with search facilities and so on. It would impossible to sustain at those rates!

“In any case, most try to charge five per cent commission, just as real estate agents do. A handful of them might be good but the government and real estate agents want to see a properly licensed sector, regulated by an appropriate government body.”