The bad news first, worse later. According to the Chamber for Commerce, Enterprise and Industry property prices fell more than estimated by the Central Bank in 2008 (over 2007), and the fall accelerated sharply in the first quarter of 2009. The Bank's index shows the price of advertised residential property declined by 2.7 per cent during 2008 but according to a study by the Real Estate Business Section and of the Federation of Building Contractors of the Chamber the year-to-year fall was around 15 to 20 per cent.

The FOBC believes the Central Bank figure is underestimated because prices are being slashed further during the negotiations stage. The Chamber's report was compiled by its director general Kevin Borg, following a review among members in the sector. If the estimate regarding the trend during 2008 was bad, that for the first quarter of 2009 was chilling. Mr Borg estimates that property prices fell by a further 15 to 20 per cent between December and March.

This fall took place in the context that Promise of Sale Agreements signed during the first quarter of this year, seem to have declined by 6.7 per cent, compared to last year. Not surprisingly, the study finds that profit margins "have been squeezed to a minimum."

As should be the case in any serious study, that of the FOBC sought to establish the causes for the downturn. It referred to the well established fact that the 2005 Census of the Population identified 53,000 vacant dwellings, apparently a clear indicator that supply was exceeding demand. Since 2005 the property stock has increased further, with further thousands dwellings being built and remaining unsold.

The dash into property development was fuelled with funds repatriated under the partial amnesties given by the government on undeclared funds invested abroad. Changes in Mepa building parameters, rezoning certain areas for additions of a further storey plus penthouse, also enticed smaller developers who began buying not-so-old two-storey houses, semidetached and even detached villas to knock them down for redevelopment.

A substantial part of the unoccupied stock revealed in the 2005 census report is actually sub-standard and should not really be counting in the over-supply balance. Yet, it remains there and for those who built it with the aid of bank finance, it represents a growing problem, even as real estate agents warn that they do not regard this stock as saleable.

The picture painted in Mr Borg's report for the Chamber is not all black. His study says that there are also indications that the downward trend is "probably being reversed" as confidence slowly returns to an industry that is one of the major contributors to the economy.

If all that, aside from the latter point, is the bad news, what could be worse? The deeper reality existing despite the Chamber's study's seriousness and frankness, that's what.

The point that asking prices advertised are not truly indicative of the real price level at which some property is changing hands, is even harsher than the FOBC study makes it out to be. Real estate agents, who continue to report only rare sales, speak of contractors slashing prices by as much as a third or more in order to clinch a deal, provided that settlement is made early. Despite many barter deals, they have the banks on their back and are carrying interest rates which, notwithstanding the prevailing relatively low rate regime, are still substantial and become more burdensome with each passing day.

It is not only small-to-medium sized developers that are feeling the pinch. The market is afire with talk of one or two very big names whose back's get closer and closer to the wall. In addition, various large schemes have slowed down or stopped altogether. Thereby, at least, they have delayed adding to the overhang of unsold properties.

As for Promise of Sale agreements, the situation could be worse than identified by the FOBC. An untold number of agreements are being renewed and renewed again, with the would-be purchasers staying away from showing up for a definite contract. There are occasions where the one per cent up-front deposit required by the fiscal authorities on such formal agreements is proving to be beyond the means of the would-be buyer, causing deals to collapse.

Has the bottom been reached, and could the glimmer of hope identified in the FOBC study grow into a welcome reality, also in the context of more sensible environmental considerations? Everybody wills it to be so. The property sector is substantially over-developed, even if one takes out the sub-standard unsalable part of it. Yet if it were to slow down further the economic ripples which are already bad, could become grim.

Can the authorities do anything? Not much, except to ensure that impediments to sales that can be properly cleared, such as Joint Office considerations, are resolved. Otherwise the market has to find its level, which will happen along with loans being called in and over-zealous developers being forced out. The dark clouds on the property sector are not close to clearing up, yet.