Small is beautiful - The 1 bedroom market

Bachelor apartments and studios are selling like hot cakes. Independent young people, small investors and seperated couples are all contributing to the bullish market.

(To answer a frequently asked question, bachelor apartments have a seperate bedroom, and sometimes a seperate kitchen and living. A studio apartment has a large room furnished as an open plan kitchen, living and bedroom and only the bathroom or shower is seperate.)

Most investors in the buy to let market are preferring the smaller apartments. They offer flexibility, are cheaper to furnish and equip, and rarely remain empty for more then a couple of weeks unless they're over priced.

Will the market hold out?

In the current unregulated market, the current trend shows no sign of relent. Hundreds of new 1 bedroom properties are being rented out, most fetching around Lm120 to Lm160 monthly in the Sliema area. The older apartments are still very much in demand too, these fetching the same Lm90 to Lm110 monthly also in upmarket areas.

When the market is regulated, people who are abusing/utilizing residential loans to purchase their property will have to withdraw from the letting market, or pay the higher borrowing rate to switch to a commercial loan. One should also keep in mind, as indeed everyone should already be doing, the tax on profits, and VAT due from foreign lessees. The short let licenses are also much higher, and the water and electricity rates in this case are commercial.

When this happens, the purchasing price for a 1 bedroom will not be sustainable, at least for the buy to let market. The rental prices will have to be increased dramatically, but will the lessees pay, or will they move back to sharing rent on larger properties, which although also at higher rates, will be more affordable?