Property and development after COVID-19

Last Monday, the Times carried a front-page story to announce that development applications are down by nearly one-third. On Thursday, the same newspaper ran a full-page report to inform its readers that there were ‘no significant changes in the price of property’ as a result of the COVID-19 pandemic.

Both stories belie many mistaken notions the media – and environmental NGOs – have about the construction and property market in Malta.

This is amply demonstrated by the fact that those who complained that construction work was not stopped during the pandemic never bothered to check how much money this would have cost the government – and the taxpayer – to subsidise the resulting large number of laid-off workers.

If there is an economic sector that reflects the basic notion that supply is driven by demand, this is the property and construction sector. This is the result of the fact that there are no serious restraints for economic planning reasons on the sector – as opposed to restraints for environmental and physical planning motivations.

Most developers can gauge intuitively where the demand-supply situation of property is going while the media and environmental NGOs seem to be at a loss about property market trends. Basically, they cannot understand the fact that these trends are driven solely by market forces – the law of supply and demand – and try to attribute what happens in this sector to other reasons.

The most ‘fashionable’ motivation touted in the media is that the sector is motivated by the ‘greed’ of developers. It is true that normally developers try to maximise the development potential of their sites – another market-driven trend.

It is also true that there some who try to cut corners by ignoring basic rules of decency at the expense of the owners of properties neighbouring their sites. This is where the general public’s complaints on the industry are justified. Both the current and the previous PN administrations have made laws, rules and regulations in an attempt to curb such abuses.

Some progress can be registered on this front, but the threat of financial punishment only does not seem to work with some. Many times it is education and manners that are lacking.

As regards the current state of the industry, it seems that developers continued on unabated in the case of the development of projects that had already commenced before the pandemic; while marking time in the case of other projects that had only been lined up in ‘the queue’.

At the moment it seems to be a waiting game, with people postponing – rather than cancelling – property purchases that they had already opted for.

The home ownership market has already been affected in the case of couples, who were taking bank loans, now having to do with the loss of a substantial part of their income as a result of the pandemic. Now, they no longer qualify for the bank loans as had been calculated before the COVID-19 era.

The number of foreign workers that have left or want to leave Malta is approximately equal to one year’s increase of foreign workers in the pre-COVID economy. If after the pandemic is over – or just legally declared to be so – the trend of annual increases in foreign workers returns to what it was, the pandemic would have only caused a blip in the property market and in the once booming rental market.

The effect of the COVID pandemic on the rental market is, in fact, the more serious aspect of the property market. Many landlords have had to reduce rents; as they preferred a reduction in their income, rather than owning empty units. Will the level of rent go back to what it was?

As regards commercial premises, short/medium-term office rentals reportedly took up an increasing amount of the market share previously reserved for long-term lease commitments.

Complaints by owners of retail outlets that they have to pay the rent for the period their establishment was closed by government regulation, are undoubtedly justified.

Many think that the property sector will never be the same again. This is a moot point. The sector needed a bit of cooling down and if the COVID pandemic ends up by doing just that, it will be actually beneficial. If the long-term consequences of the pandemic are more enduring, than the property market could be seriously affected.

Again, much depends on whether the economic situation will revert to what it was before the pandemic or otherwise... with an unknown ‘new normal’.

Football in the time of COVID

The circumstances in which Floriana were declared this year’s Malta Premier League champions were hardly normal, and the satisfaction and joys of the fans is understandable.

Unfortunately, they threw caution to the winds when they publicly celebrated ‘en masse’. No surprise that the Superintendent of Public Health, Professor Charmaine Gauci, said she was worried about what happened and asked anyone from among the throng and who develop symptoms to notify the authorities immediately. The police were reported as intending to take action once they identify as many of those taking part as possible.

The COVID-19 virus seems to have found an unlikely ally as a result of enthusiasm for football.

The Champions League fixture between Liverpool and Atletico Madrid was the last major football game to be played in England before the coronavirus shutdown. Many had called for the game to be postponed, with Madrid already in a partial lockdown at the time, but it went ahead.

There were 52,000 spectators at Anfield, including 3,000 traveling supporters from Madrid. The Spanish fans were allowed to travel to Anfield, even after Spain had closed schools and banned mass gatherings. The impact of Champions League matches on the coronavirus pandemic in Europe had already been demonstrated by Atalanta’s February win over Valencia, a game that’s now being called ‘Partita Zero’ (Game Zero), and a ‘biological bomb’.

The match, which took place in Milan, is probably a major factor in the Bergamo region being one of the hardest hit by COVID-19 in Italy, with thousands of fans travelling from Valencia and exchanging the virus with supporters from Italy.