Rising rental prices led to a shortage of low-budget properties, which, in turn, left real estate agents scratching their heads, unable to cope with requests for such accommodation, according to a study.

The study was commissioned by the Malta Developers Association and conducted by auditing firm KPMG. It is expected to be published in the coming weeks.

Highlighting some of the study’s conclusions ahead of its release, MDA president Sandro Chetcuti said that, apart from giving a snapshot of the state of the construction and real estate sector, developers aimed to project the research as a benchmark for policymakers and entrepreneurs.

He said the prevailing trend presented a golden opportunity for real estate agents. On the other hand, he noted, “unrealistic” expectations by prospective tenants.

READ: Brochure reveals Malta's rental rates

The issue of ever-increasing rental prices, fuelled by the economic boom, came to the fore in recent months as low-income earners complain of having to struggle to afford decent accommodation. The government has responded by launching a €50 million social housing project and pledging to take additional measures to support those unable to make ends meet.

The upward trend was also confirmed in an official publication as part of the government’s bid to host the European Medicines Agency, which indicated that rental prices, especially in the central area, comprising Sliema St Julian’s, Gżira and Valletta, had skyrocketed.

The MDA study highlights an acute shortage in the rental property market, especially for those looking to spend between €500 and €600 a month.

At present, real estate agents cannot cope with the demand

“At present, real estate agents cannot cope with the demand,” Mr Chetcuti said, adding that prospective tenants should keep their feet on the ground.

READ: Rising rent is squeezing low-income families

“At those prices one cannot expect to find a brand new property in areas like Swieqi equipped with all amenities such as a lift and ensuite bathrooms,” he contended.

The study, Mr Chetcuti continued, highlighted the hidden potential of properties built 20 years ago, which could still satisfy the needs for young couples looking for their first home.

“Such apartments, might still fit the bill and be much more affordable,” Mr Chetcuti said.

The study also delved into the long-term sustainability of the construction industry amid concerns of a “property bubble”.

This term is used to describe a scenario whereby demand is driven mostly by speculation until there is a sudden drop in purchases, normally linked to an economic slowdown.

Such a phenomenon could result in a sharp fall in property prices, which, in certain cases, could have repercussions on the banking sector that is significantly exposed to the construction industry.

Stopping short from giving details on the findings, Mr Chetcuti said the study indicated there was no such risk in Malta.

The analysis also gave an overview of the multiplier effect of the construction industry, which is quite often described as one of the main economic drivers of the economy. According to Mr Chetcuti there are 37,000 workers whose job depends on the industry.

“This number does not only include construction workers but also employees of companies providing ancillary services such as tile layers, plumbers, electricians and those within the home-finishing industry,” he said.

The study also focuses on the most sought-after types of properties and affordability in relation to first-time buyers.

The objective of the research is to have a clear picture of which sectors are driving the market – being properties for first-time buyers, properties to let or commercial premises – and see whether the supply is meeting demand. However, the study does not go into the number of vacant properties in a good state.

Following the study’s publication, the association aims to keep monitoring the situation and issue annual updates for at least two years.

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