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A delicate property market - Frank Salt

The property market in Malta and Gozo is doing very well. Or is it? When a property market is conceived to be doing well, more and more people want to develop. More and more people jump on the bandwagon and want to become instant estate agents, property dealers and speculators.

What in reality is happening is that too many properties are coming on the market at the same time, sometimes not the type of property that the market requires, and this results in a glut, which causes a problem with regards to prices. It also causes a problem with excess congestion.

Everybody thinks that property will always go up and increase in value. It will, given half a chance, but place too many properties on the market at the same time and the buyers have far greater choice.

This should bring the property prices down, I can hear you say. Well, it should but it doesn’t. Why?

Because everybody thinks that their property is worth at least as much if not twice as much as the one sold by their neighbour recently down the street or in the same block. I am afraid it doesn’t work that way. People in Malta also don’t seem to be in a hurry to sell.

Sellers or developers should place their properties on the market at prices that they think they realistically could get.

However, most  estate agents, except the older, wiser ones who really know the market, just accept putting the property on the market at the price wanted by the seller, whether realistic or not, and that’s when trouble starts. A true valuation, in a delicate market, is not welcome to the ears of most sellers who have not done their homework correctly before starting out on their new venture.

They are told what they want to hear, and the sale process starts with overpriced properties in an overcrowded market.

Some estate agents are still doing well because they act sensibly. Others, and some developments, are struggling because prices have risen too high, well above market viability. Over a period of time these properties should eventually sell, given normal market factors, but what happens?

More and more properties come on the market at even higher prices, and you have, as the Maltese very aptly put it, a Babilonja, or even a ġeġwiġija (confusion) of prices.

People are also buying properties in order to rent them to the hundreds of people coming to work in Malta.

But what is happening? A few of the workers coming over have salaries high enough to pay the rents being asked, but many others cannot afford these prices. So people are downsizing, moving to less desirable properties or sharing one apartment with two, three and sometimes even more persons.

I remember the same started happening in London back in the 1960s, when properties for sale and rent became too expensive. People had to share the rentals in order to be able afford to live in the areas they desired to stay. But the result could be dissatisfied and unhappy expatriates who may decide to leave Malta.

Does this mean that the Maltese property market is in trouble?

Not at all, for the moment. Many deve-lopers are still using their heads and building properties in outlying areas and selling them at relatively reasonable prices. This means that first-time buyers are more or less taken care of.

Most estate agents, except the older, wiser ones who really know the market, just accept putting the property on the market at the price wanted by the seller

But the owners of properties in areas that are more in demand have got to be more sensible and cut their coats according to their cloth, keep prices at sensible levels and listen to the wise old heads of reason that have been there before, done it and survived.

In an area designated for terraced houses, a property used to be worth the sum acceptable to a purchaser who wanted to live in a terraced house. When the Planning Authority decides to issue permits for five floors in that area, the price of that terraced house increases tremendously, as it now becomes a valuable plot of land. 

The apartments built on that land are placed on the market at prices equal to the original terraced house. This means that terraced houses are now out of reach, except for developers.

It is very difficult to tell people that their properties are too expensive, especially if one lucky owner just happened to get the high price asked. But it has to be done if we wish to maintain a sensible market.

I do not own a property that I can knock down and develop, nor do I own a plot of land that I can develop, but there are many people in Malta and Gozo who do. 

They have every right to make business and money out of their properties. Others have and are, so why not them? I am sure you would want the right to develop if you were such an owner. It is a very difficult situation. If we can, let us be patient.

Let us not do what our colleagues have done in Spain, Portugal and elsewhere, where whole blocks of apartments and villas are lying empty and unsold.

Let us not place too many properties of the same type on the market at the same time. Let us not ask for exorbitant and totally unrealistic prices. Let us always look after the first-time buyer. Let us always consider the holiday home owner and think of those coming to work in Malta and Gozo and the rents they can afford. 

Let us advise the authorities what properties are in demand, so that the correct types of property are offered on the market. Let us only build aesthetically attractive properties and let the authorities only issue permits for such properties.

And let the authorities listen to us.

Sensible estate agents and intelligent builders and owners are still doing very well. They are doing well because they do not want to kill the goose that lays the golden egg.

We must remember the past and learn our lessons. We have had an active and buoyant property market for over 50 years, so let us keep it that way.

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