We sat down with Grahame Salt, Director of Frank Salt Real Estate, for his assessment on COVID-19 and its effects on the property market.
Before COVID-19, what were the biggest market trends? And was the market already showing signs of a slowdown?
Last year, the market was very active. However, there was a drop in sales from previous years, especially towards the end of the year. I would say that 2019 was an all-rounder market with all property types selling well. The drop in sales experienced last year was actually a healthy one – the incredible demand we’ve been experiencing could have resulted in an overheated market, but the Maltese market always seems to self-adjust and last year’s sales numbers were much more realistic.
How has the Coronavirus changed this?
I think the one change that COVID-19 has definitely brought about is a greater appreciation for one’s home. People have spent more time at home alone or with their families and as a result, now appreciate how important an investment their home is. We’ve seen a greater demand for homes with gardens, terraces and views and also people are looking for the opportunity to have a space that can be used to work from, as uninterrupted as possible – like a study.
Are property prices going down? And does this apply to all types of properties?
I wouldn’t say property prices have gone down. I believe it is too early to discuss long-term effects. Property values in Malta have always been resilient – if properties were overpriced, then these prices will be adjusted to bring prices closer to market value. However, market values should not drop.
Rental prices, for the time being, have been affected, mostly due to a short-term oversupply caused by no new foreigners being able to visit and also caused by the sudden drop in demand of short-lets, which led to these properties being placed on the market for long let. We need to see how the rental market develops over the next few months.
What has the government done to try to support the property market?
Government has extended the first time buyer stamp duty saving (0 per cent stamp duty on first €175,000) as well as other existing incentives such as lower stamp duty rates in urban conservation areas and on Gozo. However, a new incentive was introduced, whereby both vendors and purchasers can save on contracts signed before March 31, 2021. Essentially, the stamp duty (purchasers) is reduced from five to 1.5 per cent and final withholding tax (vendors) is reduced to five per cent if this was meant to be at eight or 10 per cent. This incentive is for the first €400,000 in contract value. This is a very attractive incentive that can save both parties thousands of euros.
Is it still wise for young couples to invest in their own property as opposed to renting out?
I believe people should jump on the property ladder as early as possible. This allows them to take more affordable home loans, life insurance and so on. It also allows them to benefit from growth in property values, which will be inevitable over time. Bearing in mind the great savings that are possible for the next few months, there probably has never been a better time to buy at the right value and also save money in taxes.
What is mostly sought by first-time buyers?
First-time buyers always try to maximise on their budget. Because of the performance of the markets in Malta over the last 10-15 years, choice is a little more restricted. However, depending on which parts of the island one searches in, the choice is still very healthy and a lot of properties in Malta sell within the range of €130,000-€200,000. As long as you buy well, over time there is then ample opportunity to upgrade.
Why should a first-time buyer buy from Frank Salt Real Estate instead of going direct?
I think a first-time buyer needs more guidance than anyone else. Anyone looking for a property has so much to gain from proper market knowledge and the advice of an experienced agent throughout the process. A first-time buyer however, needs this even more. There is a large selection of properties available and values can be misleading. If one tries to do this alone, the end result is usually that a first-time buyer has to wade through hundreds of properties in order to find the right one. At Frank Salt Real Estate, our agents are all well trained and possess the market knowledge to simplify this process and guide you to the right property much more quickly and make sure that you buy at the right value.
Should people consider selling their property, wait for COVID-19 to pass completely?
We have no idea when COVID-19 will pass completely, if at all. I always tell my clients that if they want to sell, they should place the property on the market now as we never know when the right buyer will come along. With the limited number of cases on the island, people are now comfortable receiving clients. Our staff is all trained to respect the required precautions in any case. If visiting a house is not possible, modern technology allows us to do a lot of work virtually. This pandemic has forced us to explore all options available and we have now implemented tools that allow us to work virtually in ways we never imagined possible.
Why should one register their property with an agency instead of trying to sell direct?
Selling one’s home or real estate investments is such an important exercise, that there shouldn’t be a price for the right guidance. This is one of the largest assets one will be selling and it is imperative to price it correctly, market it correctly and also to be given the right guidance throughout the sale process. I have seen too many people try to do this alone and end up selling under market value or else getting caught up in complicated sale agreements.
Should one opt for an open agency approach or register their property with a single agency?
This depends on the property type and how many other properties you are actually competing against. A sole agency allows you to get a more focused sale process and individual attention from your agent, while an open agency allows you perhaps to be exposed to a larger market segment which in the case of certain properties might help.
What incentives are available to vendors right now?
Vendors are currently able to benefit from the reduced final withholding tax on the sale of a second home or investment. If a contract is signed by March 2021, this has been reduced to five per cent.
Why should one register their property for sale with Frank Salt Real Estate?
Frank Salt Real Estate has always been the benchmark for the local real estate industry. When dealing with the sale of such an important asset, you want to work with someone you can trust to guide you correctly, work ethically on your behalf and use all their experience to assist in the proper marketing of your home.
What impact did COVID-19 have on the commercial property market?
Businesses in general were affected by COVID-19 as the economy came to a virtual standstill in most sectors. This automatically put a lot of people’s business plans on hold. However, we have seen movement in the office segment of the market, as certain businesses have sought to relocate during this time. Some are downsizing, others are taking the opportunity to re-organise the way they work, before business becomes busy again and they won’t have time to focus on these things.
Do you think commercial rentals as office spaces will be affected post-COVID-19?
Some may opt to retain an element of home-working. However, I think most businesses will eventually want to return to their normal operations as there is nothing that works as well as an office environment – in most sectors at least.
What do you see as the major commercial property developments you expect going forward in the next few months?
We have to wait and see if there is going to be a longer-term negative impact on the economy as this may affect some businesses (and therefore their commercial property needs). I’m confident business will pick up momentum slowly and come back to normal soon enough.
What impact did COVID-19 have on the rental market?
The rental market has obviously been impacted by the fact that no new foreigners – who constitute 90 per cent of the rental market in Malta – could enter the island. There has been a lot of internal activity which has kept the rental market pretty active. We have of course seen an increase in property supply caused by the fact that holiday lets also stopped for the same reasons and therefore these property owners placed their properties on the market for long lets.
I’m anticipating that there will probably be a surge in the coming months as travel is re-opening and people become more comfortable with flying.
Do you still believe it is wise for investors to go for buy-to-lets?
Real estate is and has always been a long term investment. You need to look at the investment over a number of years. Also, looking at the volatility of the stock markets and the non-existent returns that banks offer, I think real estate investments, in the long run, will always give the most reliable returns. Even if in the short term the returns may be lower than in previous years, these will go up over time as will the value of the real estate itself. Markets always recover eventually.
What should one look out for when investing in a rental property?
The fundamental rule is to buy well in the first place. This is where proper guidance and experience from a reputable agent is crucial. As long as you buy well you can hardly go wrong. Right location, right value and a property suitable for the purpose.
What are your predictions for the next 18 months?
I think we will recover slowly economically over the next six months as long as there isn’t any major impact caused by a second wave, in which case recovery will take longer. But we will recover and as we recover, every aspect of the economy will pick up, from real estate to retail and so on. In Malta we have always been able to be agile and make the most out of any situation and I believe Malta will always be less impacted and quicker to recover than most countries.
What part will technology play?
Technology has and always will play an important role in real estate. Today so many new tools are available, that we are able to showcase properties in new and exciting ways. Buyers can ‘experience’ a property from the comfort of their home to a great extent. However, I still believe that when it comes to real estate, nothing beats the chemistry one feels when viewing a home. Therefore, technology will play a more important role in showcasing and assisting in the process and over time I’m sure this experience will become better, faster and more realistic. However, we must be careful to not rely fully on this – viewing a home in person is not replaceable.
What is Frank Salt Real Estate doing to be equipped for the future?
We have always prided ourselves in being at the forefront of using new technology to assist our clients. We continue to invest in the latest technology to make sure we give our clients – both vendors and buyers – the best level of service and experience possible.