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COVID-19 and the property rental market
During 2019, transacted property prices continued their upward trend, registering a year-on-year growth rate of 4.5 per cent in real terms (House Price Index Quarterly Data, Eurostat).
Extrapolating this trend for 2020 would indicate a high likelihood of prices increasing further. However, the COVID-19 pandemic is likely to leave its mark in the real estate market too.
Given the relevance of the developments in the real estate market to the financial sector, the MFSA has drawn on public data sources to gauge price developments in real time.
The picture that emerges is that the impact of the pandemic is already being felt in the holiday rental market. According to AirDNA.com, there were 11,330 active listings on Airbnb for properties in Malta during the week ending February 9, 2020.
This number dropped to 10,236 by the first week of June suggesting that property owners are opting to look for more secure long-term rentals given the uncertainty surrounding inbound tourism this summer.
For the remaining listings on Airbnb, the season ahead is likely to be a challenging one. August was the busiest month last year, with an average occupancy rate of about 80 per cent. In comparison, current estimates for 2020 point towards an occupancy rate of about 48 per cent during the same period. In terms of revenue, estimates point towards a 39 per cent year on year decline in revenue for the months of June, July and August.
These negative prospects may be mitigated to some extent by the recent incentives announced by government. Even so, the short-term rental market is likely to be the worst-hit real estate segment, followed by long-term rental market. The properties which were removed from Airbnb listings are likely to increase supply in the long-term rental market.
To gauge a better understanding of these developments in the long-term rental market, a web-scraping exercise was carried out, gathering information from propertymarket.com.mt which brings together listings from 21 different real estate agencies. The exercise resulted in a database of over 13,000 rental listings, of which 89.7 per cent related to residential properties.
Out of these listings, 986 listings were uploaded between the end of April and the end of May. Over two thirds of these listings were apartments, with an average monthly price of €1,215. Despite this relatively high average price, declines in the average advertised price for apartment rentals were observed across the island.
This dataset points towards a 14 per cent decline in the average advertised rental price for an apartment in Malta, during the height of the COVID-19 pandemic (For comparability, previous average figures are based on information extracted from 6,292 apartment listings made by the same real estate websites prior to February 20, 2020, with the listing samples sharing a similar composition).
The average figure was largely driven by significant declines in the prices of new listings in the Northern Harbour region, which has the highest rental prices across the island. This area includes several luxury developments, as well as the highest concentration of Airbnb rentals in the island (Ellul, R., 2019. Short-Term Rentals in Malta: A Look At Airbnb Listings. Valletta: Central Bank of Malta, p.14)
This points towards a reversal of the consistent upward trend which has been prevalent in the local rental market over the past years. Nonetheless, the removal of COVID-19 related restrictions, various government initiatives to support the economy and the re-opening of the airport in time for the peak of the summer season are positive factors that could help the eventual medium-term re-emergence of previous positive patterns in the rental market.
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Established
In 2014 the company established a full time sales division which was a natural progression for the business. 2015 was the year of Sales of property, it was a very successful year due to the unlimited demand for property.
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Why Officeinmalta.com
Office in Malta was established in 1987 and was among the first estate agencies on the Maltese Islands. We are a family run business that has been specialising in letting of residential and commercial property ever since. This gave the company the advantage of having the best database of properties to select from with over 50,000 properties on their now fully computerised website that is updated in real time. As a family business, all of the company’s clients receive full attention through a very personalised service. With a single visit with one of the Office in Malta real estate sales team one can view 90 % of what the entire Real Estate industry in Malta has to offer.
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Office in Malta
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