We are a group of people who try to do their best to help property buyers not to be taken advantage of. We dig into the data, we do our best to find good investments for our clients, and that’s a good day’s work done. So when we see a carousel of real estate agents announcing that “everything is fine” while the deepest recession since World War II is upon us and there isn’t a tourist in sight, well, we have a civic duty to set the record straight.
Below is the controversial observation that got us banned from the Times of Malta comments:
These soundbites and anecdotes without a shred of hard data aren’t “putting paid” to any forecasts.
One says nothing changed and welcomes the reasonable changes (?). One says the foreign market is solid while no foreigners can enter the country. The other says promises of sale didn’t fall through knowing full well that a legal notice froze all of them while the courts were closed.
The one silver lining propping up the market is the knowledge that lending requirements will become stricter in July – and I expect a full govt U-turn there. But we can all see what is happening with the flood of long lets on the markets and the fall in rates. If you think that has no repercussions on prices…
Well ToM, hope that was worth trampling on free speech.
So let’s look at what is actually going on. We have written before that the lack of tourists is killing the short let market, and short lets are being converted into long lets at much, much lower rates. We also wrote that even if every single Maltese decides to holiday at home, there will be a 90% shortfall in nights spent.
We can already see that the number of short lets on the market has decreased substantially – converting into long lets just as we predicted and depressing rates. Let’s look at a few localities:
Or if you prefer to read the numbers:
So while Valletta is kind of holding up all right, there are 30 – 45% fewer short lets on the market in other hot spots around the country. To translate this into more relatable terms, one third to about half of short lets are making little or no money for their owners. To give a further example, property owners in Sliema have a gap of about 60% in April 2020 versus their revenue in 2019. How it may be possible to look at this data and say “Nothing has changed” is perplexing.
The more attentive readers might however remark: “Surely removing all this supply from the market is supporting those holiday lets that are sticking it out?”. The answer is: not always.
In tourist localities such as some of those shown, the pent-up demand from weeks of lockdown is coming to light through healthy rates. In others, the situation is less rosy. It remains to be seen to what degree the second half of the year (COVID permitting) will be supportive of letting rates.
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