Citizenship sale has pushed up property prices, Central Bank says

Property prices have shot up by 9.9% compared to the January-March 2015 period, according to the Central Bank’s index of advertised prices for resi­dential property.

This followed an increase of 10% during the final quarter of 2015, and an overall growth rate of 6.3% in 2015.

Growth in advertised house prices has been strong since the end of 2013.

The Central Bank said residential property prices were being boosted by a number of factors, with the Individual Inves­tor Programme and the scheme for first-time buy­ers feeding the demand for property.

“Property demand is also being prompted by strong growth in dispos­able income in the context of a robust labour market, an increasing number of foreigners working in Malta, as well as the low interest environment,” the Central Bank said.

The IIP, which sells Maltese citizenship to the global rich for €650,000 apart from property and stock acquisition requirements totalling €400,000, was also responsible for pushing up revenues for the Maltese government.

Tax revenue also grew by 10.6% over the previous year, with income tax rising by 7.1% on the back of a growing labour market. “Revenue was also boosted by higher inflows from sales, partly driven by higher receipts from the Individual Investor Programme,” the CBM said.

IIP inflows also affected the profile of government consumption. “These inflows, which are netted against consumption expenditure, rose significantly in 2015. They are expected to increase at a slower pace in 2016. This has a positive impact on growth in government consumption, partly offsetting slower growth of intermediate consumption and compensation of employees.”

In 2017, inflows related to the IIP are projected to decline, pushing up growth in government consumption. In 2018, government consump­tion eases again, while inflows from IIP are expected to remain similar to those in 2017.

Property price growth

The observed strong growth rates in advertised property prices at the turn of 2016 reflect rapid increases in the prices of maisonettes and terraced houses, which rose by 13.6% and 19.6%, respectively during the first quarter of 2016.

Annual growth in prices for apartments, which comprise over half of the properties in the sam­ple, remained robust at 7.8%.

Similarly, prices in the “other” properties category, which consists of town houses, houses of character and vil­las, grew by 7.7% when compared with a year earlier.

The National Statistics Office Property Price Index, which is based on actual transactions involving apartments, maisonettes and terraced houses, also grew during the period, though at a more moderate pace.

The latest data points to an annual growth rate of 2.6% during the first quarter of 2016, roughly similar to the figure of 2.7% in the final quarter of 2015. In 2015 as a whole, contract prices rose by 3.5%.

A slower growth rate for contract prices when compared with advertised property pric­es could reflect meth­odological differences in the compilation of the two indices, lagged effects and a tendency to boost asking prices in an upswing.