Malta Developers Association (MDA) president Sandro Chetcuti has rubbished claims made in an annual International Monetary Fund country (IMF) report, which said that property in Malta has become modestly 'overvalued', meaning that property is worth more than it should be.
Justifying the increase in prices, Chetcuti also said that all indications show that property will continue to increase in value in the foreseeable future.
The IMF report remarked on the strength and sustainability of Malta's economy, while highlighting several risk factors which are to be closely monitored.
In terms of housing, the IMF commented that the controversial Individual Investor Programme which carries with it requirements for purchasing property or renting, could run the risk of creating a property bubble through "a rapid influx of housing investment".
Government has announced plans to extend the IIP scheme. Some weeks ago, a Eurostat press release highlighted how Malta had the second biggest jump in housing prices within the Eurozone when compared to the same period the year before.
Both the MDA and the government have repeatedly acknowledged the sky-rocketing prices in the rental market but have maintained that the majority of Maltese residents own property, and that buying a property has become more affordable when considering other factors.
MDA had commissioned big-four firm KPMG to carry out a study on the matter, which said that for the time being it does not foresee a housing bubble. In light of the warning sounds coming from the IMF and the previous declarations made by local stakeholders, The Malta Independent questioned Chetcuti on whether he still believes that Malta's property market has in fact become more affordable.
Affordability
"When looking at the KPMG report which was approved last year, we found that there are more people who can afford to buy than ever before," Chetcuti said.
"KPMG never said the prices went down, it said that since there is a lot of work and the economy is doing well, people have better opportunities to work, it could be that they are earning more money.
"Since there is more work, there are more people thinking about buying and taking the necessary steps. In terms of affordability therefore, this has not gone down."
"If you look at workers today, there is more potential to make money. In an economy that does not function so well workers are unstable in their job security and are careful on how to spend. Today we do not just have steady jobs, but better wages and conditions for those who want to work."
He went on to say that in terms of interest rates on home loans, these are not obstacles to affordability as they are currently favourable.
Increasing prices
"When it comes to prices, they are going up. All indications point towards property values continuing to increase as property depends on the price of land, which has exploded.
Contractors are finding it very difficult to buy pieces of land for development at reasonable prices.
They are being asked to pay exaggerated sums for certain plots and land, making it more difficult for price of land not to increase.
In addition, the fact that land appreciates in value also contributes to increases in prices," he said.
"This is the normal appreciation value of property when there is a healthy economy. Another drawback is that the land costs a lot, meaning it is very difficult to maintain stable prices."
Chetcuti concluded by saying that another reason for housing prices going up is that the finishings people expected 20-15 years ago are very different to the internal finishings that people expect today. With that in mind, he said the biggest challenge remains finding land at a reasonable price.
from The Malta Independent http://ift.tt/2EtDvNV
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