Continued weak demand for property in Malta is likely to prevent the market from stabilising in the short to medium term, according to a new report from the countryââ¬â¢s Central Bank. The Times of Malta also reports that banks are facing increased credit risks because of their large exposure to the property sector.
Supply of property in Malta outstripping demand
The Central Bankââ¬â¢s latest Financial Stability Report analysed financial data from 2010 and the first few months of 2011. It found that ââ¬Ëthe slowdown in the property market reflecting an ongoing structural adjustment raises the credit risk associated with these projects.
ââ¬ËIn particular, additional supply of housing units may extend the period of lull in property prices.ââ¬â¢
Estimates show that construction projects currently under way in Malta will result in almost two thousands new residential units ââ¬â less than half the total property transactions in Malta in 2009.
The newspaper reports that ââ¬Ëthe Central Bank warned that it was unlikely that the property market would return to buoyancy in the short to medium term.ââ¬â¢
Volume of sales of property in Malta declining
Last year saw a significant reduction in the number of building permits issued by the Malta Environment and Planning Authority. The Central Bank report also pointed to official statistics which indicated that the number of contracts of sale registered with the Inland Revenue Department in 2008 and 2009 dropped by 18.1 per cent and 3.9 per cent respectively.
A survey by the Central Bank in early 2011 also confirmed that the volume of sales of property in Malta was continuing to decline.
The report said: ââ¬ËThis notwithstanding, housing affordability remained relatively stable, owing to sluggish house prices and still low mortgage rates.ââ¬â¢ While it also acknowledged that the financial system exhibited ââ¬Ëa high degree of resilienceââ¬â¢ in 2010, it also warned that the prospects of financial stability in Malta will remain challenging in 2011.
