How Malta’s property letting market has reacted to COVID-19. Opportunities and challenges ahead.
The Eurozone’s economy grew at a rapid rate since 2013 and this contributed to the unprecedented boom in Malta’s already flourishing property market. This upswing boded especially well for the lucrative local rentals market.
The entire property industry, a very important component of the national economy, has always been one of the best places to invest in, the reason for this being that interest rates given by the banks have been at historic lows for some time. It, therefore, makes far more sense for those with extra savings to invest in the real estate market by means of buying additional properties to let out. This is a win-win situation as not only does the value of the property appreciate over time, it also provides a rental income stream in excess of any interest amounting on bonds taken out to acquire these properties.
Currently, the letting market is recovering from the impact of Covid-19, like most property markets elsewhere in the world. Smaller numbers of tourists and expats needing accommodation have left their mark, but it is confidently reported that the market is picking up and doing well. With many measures still in place to curb the spread of the virus, experts predict that the fallout of the pandemic will take some time to dissipate and Malta is no exception, although several of the centrally located upmarket areas have done extremely well with rentals during this arduous time. The overall residential sales market has done surprisingly well, realising an increase in sales of 21% for October 2020 and 18% for November 2020 when compared with the same time for the previous year. Astonishingly, residential sales boomed in December 2020 with an unbelievable 1,390 Promises of Sale signed, as recorded by the MDA.
As a large number of rental properties operate in the very lucrative short-term tourism market, some landlords have decided to take their properties off the short let market for the time being and to rather award long-term rental contracts at lower rates to qualifying tenants. Presently this makes more financial sense as it is far better to have a secure lower rental than risking having no rental at all. Alternatively, other landlords have opted to lower the rent for a few months while some did not charge any rent at all, for a period of time, in order to retain good tenants who were finding it a challenge to keep up with rental payments due to the pandemic.
To explain the complexity of the local letting market and its heavy reliance on expats and tourism, one has to consider the facts: in Malta, 80% of households own their own homes with the other 20% renting; but out of this 20%, only 10% rent at normal market prices with the rest being either subsidised, rent-controlled or protected by Maltese Law (if rented prior to June 1, 1995). This is presently under revision in order to offer a more fair rental income to landlords. So the rental market relies heavily on the demand from expats working or simply taking up residence in Malta.
In the last few months prior to lockdown, there were indications that rental prices were tapering down as discounts were considered and in many cases granted by landlords to secure a reputable tenant. Experts hinted at the time that the underlying cause of this was possibly linked to oversupply in the rentals market. Globally the rental market’s growth is only expected to grow at a compound annual growth rate (CAGR) of a mere 1.6% for 2021 due to the impact of Covid-19, but there is a rather bright ray of light at the end of this very dark tunnel: a return to a way of life for all that will be considered as the “new normal” post Covid-19, sees this growth optimistically predicted to be a healthy 8% for 2022 globally.
Philippa Tabone, the Letting Manager for Frank Salt Real Estate had this to say: “For some time now landlords had to deal with the reality of the situation. We no longer have multiple tenants competing for a single property, as the market has become more of a tenant’s market, where they now have more choice and bargaining power. Tenants are taking their time and filtering options, preferring a fresh, modern well-maintained property over tired older units” .
Letting agents in the meantime had to get creative and a lot better at what they do to get their client’s listings noticed out there. Besides the de rigueur online listings and video tours, some agents resorted to virtual reality and live on-site remote inspections on behalf of prospective tenants. This was all done in an effort to minimise personal exposure and therefore one’s risk of infection. But this was just the start of a slew of new innovations in the local rentals service offering to landlords: in conjunction with the clever and aggressive marketing of rental properties, a leading agency such as Frank Salt Letting saw added value as the way forward in assisting landlords to get a qualified tenant faster.
Frank Salt Letting has gone a step further than the rest, once again leading the market, by teaming up with their unique Home Interiors Division in order to assist landlords in letting out properties quicker. Says Douglas Salt, Director of Frank Salt: “In the case where a landlord has experienced difficulty in letting out their property for some time, the two professional Divisions at Frank Salt Real Estate put their heads together and assessed what needs to be done. Hand-in-hand with the Letting Division, the Interiors Division inspects an apartment and advises what can be done in order to improve the chances of letting the property: they will prep it, organise a décor makeover and engage the services of a professional photographer for a photo-shoot. Once this is all done, we showcase the property through proactive, edgy marketing campaigns online and in the press.”
Mary Bezzina and Leonard Grech, Executives at Frank salt’s Home Interiors Division had this to say: “Due to the current competitive nature of the rentals market and the fact that it is looking to be picking up strongly, it cannot be stressed enough how important it is for landlords to consider improving the standards and interiors of their rental apartments. As tenants are already spoilt for choice and brand new apartments are completed and come on the market daily, landlords who are hesitant to improve the interiors, furniture and fittings of especially older apartments, are unlikely to find tenants as quickly as they did in the past. We at the Frank Salt Group’s Interiors Division are ready to be of service, ready to assist and extremely qualified to deliver a full-rounded service to any landlord who feels they need the input of a professional team of experts to increase the chances of letting out an apartment. We’ve had some great results in this regard recently.”
In addition, all of Frank Salt’s Letting agents are now accredited, certified and qualified to comply with Malta’s new property laws, so you will only be dealing with professionals from start to finish. With the company’s more than 51 years’ experience in the local rental market, this is a team that is very difficult to beat when it comes to know-how and in achieving results! As part of kicking off this new initiative and collaboration between the two divisions, Frank Salt Real Estate will also be posting some handy tips on how to get your rental apartment ready for letting, such as choosing between blinds and curtains, choosing the right paint colours should you decide to go it alone and (what will prove to be a favourite), top tips on how to go about renovating a rental apartment on a limited budget.
With summer around the corner and Malta’s rentals market timeously on the upswing, there is a palpable sense of anticipation about the better days ahead and therefore there has never been a better time to get your rental apartment into tip-top shape!