Letter to The Times of Malta - Insight into the property market

Letter to The Times of Malta, from Francis Raeymaekers, Mellieħa.
Date of publication: March 28, 2012

I refer to the editorial Mixed Messages From The Property Industry (March 21) and as a director of one of Malta’s few property search companies would like to make some observations.

The Maltese construction sector is in the doldrums for two significant reasons: lack of funds and greed. Greed as typified by substandard construction where corners are systematically cut in the quest for ever greater “paper” profits. Some glitzy developments built with no or little ventilation, window fixtures installed with foam guns, and so on and so forth. Greed, as typified by overdeveloping developments, constantly adding to the current stock by clever manipulation and re-application of planning permissions. All impact the resaleability of the developments, creating substantial overhang and despair for owners who made the error of buying in the first place. The word gets out and funding dries up. The banks know first, as it is usually their clients who are caught in negative equity situations. After the banks, the public soon gets hold of the facts. Malta is small enough to always know a friend who has a friend who… The buyers become aware.

With regard to oversupply, this is both correct and false at the same time. There is a vast oversupply of small utilitarian apartments that few would ever want. Granting planning permissions without consideration to parking issues is not an accident waiting to happen, it has already happened.

Malta is blessed with a population who are all property experts, from the President down to the baker’s apprentice. How one would attempt to regulate this is difficult to say. Perhaps insisting, as the Knights of old used to, on a start and completion date for each application or introducing a “windowless” tax on incomplete projects might mitigate the number of partially built concrete and stone carbuncles that litter the island. Perhaps another idea might be to impose solar water and power installation on any new build or redevelopment. While this might add to the individual cost, so restricting numbers beneficially, it would also be of great value to this energy-dependent island and its economy as a whole.

Strangely the oversupply of utilitarian property is matched by a shortage of saleable property that is well built and in good, desirable locations. We often tell our overseas clients that there are less than 500 properties worth buying on the whole island, in all categories, from palazzos to studios. Of course, worth means different things to all. It can mean a roof over a head after a hard day’s work, a place to bring up a family, somewhere to retire to, a holiday home or even an investment. The last three are usually relevant to overseas clients.
Overseas clients are often told there are less than 500 properties worth buying on the whole island

The issue of valuation is another difficulty. The current statistics based on advertised prices are worthless. It should not be beyond Maltese sophistication to produce figures from actual transactions based on figures that the government already has in its possession. How else do they collect stamp duty? The seas around Malta have become much cleaner and clearer in the last 10 years but government administration and state bureaucracy remain stubbornly opaque. This may have worked well in the past but is no way to run a modern 21st century EU state.
Another area of growing indignation, especially among non Maltese EU citizens, is the discrimination in the pricing of utilities. The elite legal opinion is that there is no discrimination. I wonder if Maltese EU citizens, renting an apartment in London, Berlin, Brussels, Paris or Rome, were told they had to pay 30 per cent more for their utilities than other local users, would accept it as being non-discriminatory? Even if a non-Maltese EU citizen buys a property in Malta, they have to apply to the director for citizenship and of expatriot affairs for a “registration certificate”, which is not needed if looking for a job. If this neatly ties up loose ends within the opaque Maltese legal community, it completely ignores the perception of discrimination, which is growing daily within the “expat” community in Malta. This community is very important to the Maltese property market and is ignored at Malta’s future economic peril.

Finally, with regard to Maltese estate agents, they are what they are and just doing their job. If the headwaiter in a restaurant greets clients saying “The food is terrible here, what would you like to eat?” the restaurant will not survive for long. The property market is not different. In a way, a property search company is like a restaurant guide. It tells it as it’s tasted it and can pull a few recommendations from a lengthy and often “flowery” list of dishes and wines.

Conservative Malta tends to be comfortable in opacity much as the Italian economy was once described, as a goldfish in a pot of cold water on a hot stove.

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