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Property market sounds alarm over ‘economic uncertainty’
Developers and estate agents say property market slowdown has seen banks complaining that requests for house loans have reduced drastically.
16 February 2012, 12:00am
Matthew Vella
Matthew Vella
2 min read
Non-performing loans in Maltas corporate sector rose in 2010 by almost 40% to 527 million. For the construction sector alone, in 2010 non-performing loans were 23.6% of total corporate loans.
Developers and building contractors, and estate agents have issued a warning over the "precarious" property market they are experiencing, warning of deteriorating conditions in the prevailing climate of economic uncertainty.
In a statement, the Malta Developers Association, the Federation of Building Contractors, the Federation of Estate Agents, said they were greatly preoccupied that the current economic uncertainty was allowing the already precarious situation of the property market to deteriorate further.
The three associations, which are not represented on the MCESD (Malta Council for Economic and Social Development), said they were not being given space to make their voices heard in this forum, despite their sector's importance for the economy.
"Although it has emerged that so far the employment figures are satisfactory, the three associations fear that if the economic uncertainty continues to persist, the situation in the construction sector will continue to deteriorate, resulting in a lessening of the rhythm of this major motor of the economy in our country and a considerable number of jobs will be lost in the sector, to the extent that those who will be unemployed will not be able to be absorbed in other sectors of the economy, as has happened so far," the associations said in a statement.
"Apart from that, the slowdown in the activity in the property market can have a negative impact on the financial institutions, to the extent that the banks have already complained that requests for house loans have reduced drastically."
Concerns about Malta's weakening construction and real estate sector were already given a worrying picture by the Central Bank's financial stability report, which warned banks to remain vigilant on their exposure to high credit risk and the effects a decrease in property value could have on their collateral.
The Central Bank says non-performing loans in Malta's corporate sector rose in 2010 by almost 40% to €527 million. For the construction sector alone, in 2010 non-performing loans were 23.6% of total corporate loans.
"The operators in this sector feel that a lot of development work can be done to modernise existing buildings, work that today nobody is being encouraged to take on because of the current situation of uncertainty.
"Several businesses and self-employed persons benefit from the economic activity that the property market generates, apart from those directly employed in the sector. These are all in danger of being hit negatively."
Matthew Vella, a freelance journalist at MaltaToday, was formerly executive editor at Malt...
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Government new residency scheme does not help
Real Estate market at all. This killed almost
any foreigner real estate investment in Malta
and trust in Maltese government
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It was bound to happen as the real estate prices had exploded in Malta and the value for money is no longer there. Real Estate in other countries is much more attractively priced and I do not mean just the ex East Bloc countries either. As with other commodities, the industry will simply have to adapt and start offering some value for money for a change. These developers have been fighting tooth and nail against any form of regulations and control so this inevitable mess is all their own fabrication. Why we need to keep the real estate prices so artifically high is beyond my comprehension because it is leading to stagnation and frozen assets
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Good. Let them weep their losses. They are to blame for the environmental destruction in Malta and the unjustified explosion in property prices. They are a normal business so they should bear their losses and not expect us through government to bail them out.
Anette B Cassar •
@Skocciz, Tax it. That will start sales. Then get sale of property tax.
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I was recently reading about the collapse of the property market both in sales and rentals in Spain and many of their current problems with over and a half million vacant properties reflect our situation. There house prices are down by 50%. The only perhaps redeeming factor in our case is that many of our investments in development were not mainly financed by bank loans. However one issue which struck me was that like us there is already a very high house ownership and therefore the potential captive market for sales is low unless they attract foreign settlers. What is different to us is that we keep on building and developing and continue to exacerbate the situation whereas they have realised that investment much be channeled to other areas of economic activity and growth.
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The writing has been on the wall for quite a long time, but the property market preferred not to read it. Their answer was to build even more unsaleable commodities. Ridiculous!
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Does this mean that property prices are expected to
fall in the coming months ?
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We have 125 million in nearly dead capital. Imagine what we can do with it if it was more liquid in this financial conundrum.
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great news! hope the price of property continues to drop!! like that my kids can finally leave the house!! at current prices, they're gonna be here for good!
