House price surge questioned by developers’ president

Clarification: In the original version of the article, appering on page 8 of the MaltaToday print edition of 19 April, the wrong photo of Ian Casolani was used. The error is regretted.

The president of the Malta Developers Association has questioned data published by the EU’s statistical arm, which reports an 11% rise in property prices in the last quarter of 2014.

According to the House Price Index house prices in Malta rose by 11 per cent in the fourth quarter last year, compared to the same period the previous year.

The HPI measures the price changes of all residential properties purchased by households, independently of their final use, and are compiled by the national statistical institutes.

According to Eurostat, Malta had the second highest annual increase among the EU states, the highest being recorded in Ireland (16.3 per cent).

Throughout 2014 – the year Malta’s Individual Investor Programme was launched, inviting new citizens to purchase houses of over €350,000 in value – prices compared to their previous quarters increased by 0.8% in the first three months, 3.5% in the second quarter, 3.9% in the third quarter, and 11% in the final quarter.

“I question the data,” association president Sandro Chetcuti told MaltaToday, adding that the Eurostat report was the subject of talks between fellow developers.

“I’d say the increase in prices would be more akin to 4%-6%, and nobody other than us developers is better placed to know at what price property is being sold.”

Chetcuti claimed that sales had increased thanks to a demand for highly-finished residences, but he doubted that the scale of price increases was as high as 11%. “Customers want houses that are energy-efficient, of high standards and finishing, and are happy to pay a higher price for that quality… but I assure you that the 11% price increase is debatable,” he said, playing down the extent of property price inflation.

On the other hand, the head of Malta’s federation of estate agents (FEA), Ian Casolani, was keener to acknowledge that foreign investment and incomes for highly-skilled foreign workers had increased demand in the rental market.

“In certain segments of the property market, the rise could perhaps be attributed to the IIP. But beyond the feel-good factor in the market, it is the letting segment that is performing well,” Casolani said.

Casolani said investors were purchasing property to cash in on the letting business, sure to secure long lets for foreign workers looking for a house in Malta, or even for holidaymakers.

“There is a strong buy-to-let demand, and apart from long lets for foreign workers, the internet has made it possible for homeowners to manage their own letting business,” he said, with websites like AirBnb removing middlemen and leaving more cash in homeowners’ hands. “You can get a 5% return on a €200,000 house,” he said.

But ultimately, Casolani credits the price surge to foreign direct investment.

“Companies are setting up base here because the island is an attractive proposition for business – quality of life, highly-skilled labour not as expensive as elsewhere in Europe, and English-speaking – so the demand for propery is there.”

Malta was followed in its property price surge by Sweden (10.4 per cent), Estonia (10.1 per cent) and the United Kingdom (10 per cent), and the largest fall was in Slovenia (-4.4 per cent), followed by Cyprus (-3.3 per cent), Latvia (-3.2 per cent) and Italy (-2.9 per cent).

The highest quarter-on-quarter increases were recorded in Malta (4.6 per cent), Ireland (3.8 per cent), Slovakia (2.1 per cent) and Luxembourg (2 per cent), and the largest falls in Latvia (-10.2 per cent), Lithuania (-4.3 per cent) and Cyprus (-3 per cent).

Over all, house prices in the fourth quarter rose by 1.1 per cent in the euro area and by 2.6 per cent in the EU compared with the same period the previous year.

Compared with the previous quarter, house prices went down slightly in the euro area (-0.1 per cent) and remained stable in the EU in the fourth quarter of 2014.