Property Prices in Malta

These documents contain excerpts about property prices in Malta, mdina, valletta obtained from the Central Bank Annual Reports issued between 1998 and 2009. Excerpts taken from the Central Bank Annual Reports: http://www.centralbankmalta.com/site/publications2.asp

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2000 Report

Movements in asset prices are a useful indicator of underlying inflationary pressures in the economy that are not reflected in the RPI basket. One of the principal investment assets in Malta is real estate. The Bank monitors movements in real estate prices through an index of asking prices for property, stratified by property type and by locality. The principal shortcomings of this approach are that asking prices are higher than actual contracted prices, and the difficulties involved in finding comparable properties on the market at different points in time.

Chart 2.5 illustrates the overall index of property prices, and a similar index which adjusts for properties in special-designated zones intended for sales to foreigners that tend to exert an upward bias on the overall index. Property price inflation was at a peak in 1996 and thereafter tended to develop cyclically reflecting swings in demand. In the year 2000, an increase in property asking prices was observed, which may be indicative of an incipient recovery in market demand.

1999 Report

Chart 2.5 illustrates movements in the average asking prices of dwellings (including finished terraced houses and flats and maisonettes in shell-form) over the six years to 1999. This suggests that house prices, which had fallen slightly in 1997 before recovering in 1998, remained relatively stable during 1999. This slowdown in real estate price inflation during the last three years may be due to a combination of two factors: the relative weakness of domestic demand and the fact that during the early 1990’s the number of newly constructed dwellings far outstripped demand, leaving a surplus on the market.

1998 Report

Developments in real estate prices are a useful indicator not only of activity in the construction industry but also of the strength of domestic demand. In fact, a booming property market tends to boost consumption expenditure, partly because of the wealth effect. Chart 2.7 illustrates the percentage change in the average asking price of dwellings (including finished terraced houses and flats and maisonettes in shell-form). The Chart shows that, following the sharp increases in prices observed during 1994 and 1995, a slowdown was noted in 1996 - and by the following year, asking prices of dwellings were actually declining.

These developments in real estate prices reflect the slowdown in both domestic demand and in activity in the construction sector during the last three years. However, it is worth noting that the average rate of increase in real estate prices in 1994 and 1995 was clearly unsustainable - as the number of completed dwellings was by far outstripping demand.

Chart 2.8 illustrates movements in the average price of the three types of dwelling units between 1993 and 1998. From the Chart one can observe that the price for each category of dwelling generally followed the same trend, with prices peaking towards the end of 1996 and following a stable to downward path thereafter. The same trend can also be discerned in Chart 2.9, where average property prices are expressed as a ratio of the annual average income from employment per employee. The Chart shows that by 1998 the average price of a finished terraced house was twelve-and-a-half times the average annual wage, while that of a flat and a maisonette in shell form was 6.7 times the average wage.