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4 NEWS 30.6.2022 FROM PAGE 1 The findings of the study were pre- sented by economist Daniel Gravino on Tuesday, with new insights on the selling and rental house markets. According to the study, house prices in 2022 were double what they were in 2013, with fast growth recorded in the five years leading up to 2019. Higher rates of growth in the hous- ing market were recorded between 2013 and 2018, although a marginal negative change was recorded in the second half of 2019 - a period marked by political turmoil and uncertainty in Malta. Prices began to grow steadily in the first half of 2021, but current growth rates are still far from what they were in 2016. Meanwhile, rental prices have in- creased by 42% over the nine-year pe- riod in question. A property that would have been rented out for €500 a month in 2013 would be rented out for €800 a month in 2019. However, rental prices suffered a de- cline in 2020 at the onset of the pan- demic, with the majority of properties being rented out for between 5% and 30% less than in the previous year. Key insights The relative stability of selling house prices, even in a period where rental prices declined, suggests that people who have been investing in property believe that the dip in rental prices is temporary. Additional housing supply out- stripped additional demand, putting downward pressure on prices in 2020 and 2021. This doesn't necessarily translate to a decline in prices, but rather to a slower rate of growth. The immediate future is challenging. While demand is there, there is an up- ward pressure on prices due to high construction and finishing costs. But recovering demand could put upward pressure. Current market prices are "just sus- tainable". They will remain sustaina- ble going forward only if both incomes and housing prices remain stable. If prices go up, incomes have to go up. Between 2010 and 2019, additional demand for housing units increased rapidly, largely a result of the increas- ing number of foreigners relocating to Malta. But in 2020, incremental user de- mand turned negative as tourist ac- tivity plummeted, resulting in less de- mand for short-stay properties. By 2021, incremental demand turned positive again - a shift driven by first- time buyers, a growing foreign-born population, and a recovering tourism industry. However, housing supply has been growing faster than demand. The study looked at the number of permits for new units issued by the Planning Authority to gain insight into housing supply. The number of permits increased substantially since 2016, with 20,000 additional units issued in 2018 and 2019 alone. However, it takes one to three years after the issuance of the permit for a unit to be added to the housing stock. With so many permits being issued, the report suggests that significant additions to the housing supply stock will be seen between 2021 and 2023. What's the outlook? The report forecasts a slowdown in additional housing supply paired with recovering housing demand. This is expected to ease, but not eliminate, the current downward pressures on housing prices. However, the housing market is one of many sectors that has been hit by inflation. The average cost of raw materials for construction reportedly increased by 30% to 40% compared to the pre-pandemic period. In addition to this, the European Central Bank is expected to raise in- terest rates in response to high rates of inflation, affecting the rate at which investors can borrow to finance their property purchases. The verdict: current market prices are just sustainable enough. Howev- er, housing prices and incomes need to remain stable together. If prices go up, incomes have to increase with it. Real estate stability In 2021, the number of final deeds and promise-of-sale (POS) agree- ments signed increased back to pre-pandemic levels. Gravino pointed to two possible rea- sons behind this statistic. With the economic slowdown seen in 2020, many closed off their deeds in 2021 instead of 2020. Additionally, many property seekers sought to benefit from the stamp duty exemptions that the government in- troduced as part of its COVID-19 eco- nomic recovery plan. This prompted property seekers to buy sooner than originally intended, as they started to anticipate the expiry of the stamp du- ty exemption. Current market prices are "just about" A new collaborative report by Dhalia Real Estate and Grant Thorton show that house prices now are double what they were in 2013 10 ©2022 Grant Thornton. All rights reserved. The Selling Price Index is presented in Figure 1. It reflects developments in the price of several types of housing units, including apartments, maisonettes, townhouses, terraced houses and villas. It shows that between 2013H1 and 2022H1 house prices increased by 100%. This means that, on average, a property that sold for €100,000 in 2013H1 would have been selling at €200,000 in 2022H1. This represents a significant increase in house prices that coincided with fast economic growth and a strong influx of foreign workers. Figure 1 Selling Price Index (2013H1=100) The Selling House Price Index measures the rate of change in the selling price of housing units in Malta over time. These are estimated on a bi-annual basis, starting from 1 January 2013 to 30 April 2022. 80 100 120 140 160 180 200 220 2013H1 2014H1 2015H1 2016H1 2017H1 2018H1 2019H1 2020H1 2021H1 2022H1 The Selling Price Index reflects developments in the price of several types of housing units, including apartments, maisonettes, townhouses, terraced houses and villas. It shows that between 2013H1 and 2022H1 house prices increased by 100%. This means that, on average, a property that sold for €100,000 in 2013H1 would have been selling at €200,000 in 2022H1. This represents a significant increase in house prices that coincided with fast economic growth and a strong influx of foreign workers. Selling Price Index

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