Malta mismatch 'good' for investors

Now is a great time to snap up real estate bargains in Malta…

Growth in property prices have been on a downward spiral since 2004, when Malta acceded to the European Union – from a 20.3 per cent growth rate in 2004 to 9.8 per cent in 2005, 3.5 per cent in 2006 and decelerating to just 1.1 per cent last year.

While the trend is clearly bad news those who entered the Malta market over the last few years, it is definitely good news for prospective home buyers.

Last year’s slowdown in home prices was most marked in the price of flats, where it appears supply is far outstripping demand. The only area in which prices continue to grow healthily were terraced houses and houses of character.

The price of finished flats decelerated from its already modest growth of 2.5 per cent in 2006 to 1.8 per cent last year. Growth in the price of flats in shell form, meanwhile, shrank from 8.5 per cent growth in 2006 to 1.4 per cent in 2007.

Lending risks

Prices for villas saw perhaps the greatest deceleration, falling from 2006’s growth rate of 10.6 per cent to just 0.9 per cent last year, while the price for maisonettes and town houses contracted by 4.6 and 7.1 per cent respectively.

Growth in property prices was kept afloat by more comparatively robust increases in the price for terraced houses, which increased by 4.6 per cent, and houses of character, the price for which grew by 11 per cent.

The Central Bank of Malta noted: “Risks associated with such lending have grown as a result of cyclical and structural factors,” the CBM observes. These include both an increase in the mismatch between the supply and the demand for property, and the high concentration of bank exposures to this sector.”