With substantial price increases on the horizon, will the glut of luxury ‘lifestyle’ apartments survive its recessionary hangover, asks DAVID DARMANIN
The fate of a brand new stock of luxury residences in Malta and Gozo remains unknown in 2010, as developers, real estate specialists and market observers have offered divergent views on the effect of the recession on the dampened property market.
The international property consultancy firm Knight Frank is ranking Malta in third place among 42 developed countries that have witnessed price increases in residential property throughout the third quarter of 2009. At an average 9.7% annual increase, house price increments in Malta compare with Austria’s, where residential property has only become pricier than Malta’s by a fractional percentage. Israel ranked first, the only country seeing double-digit growth of 13.7% in residential prices. But an ill-fated Dubai ranked at the far end, with a severe slump of 47%.
Malta has its fair share of new and ongoing developments that are due to supply the market with new luxury or ‘lifestyle’ residences, such as Ta’ Monita Residence – 16,000 square metres in Marsascala; Pender Gardens in St Julian’s, where 16 villas and an additional 200 new apartments are planned; the Metropolis in Gzira, with three towers (the highest being 33 floors) expected to host a wide range of luxury apartments; MIDI – 44 hectares of Manoel Island and Tigné Point of up-market apartments; and the second phase of Fort Chambray, in Gozo – which will incorporate 85 two and three-bedroom single and duplex units. And permits are still being sought for the construction of a new tower in Sliema on the site that previously hosted the Union Club; while the owners of the now deserted Jerma Palace Hotel, JPM Bros, are looking for buyers with the likely prospect of the site being transformed into a residential and commercial centre if sold.
“Malta’s performance does not augur well at all for 2010,” a financial expert told MaltaToday. “If Malta’s unsold stock of luxury residential units is there to attract foreign investors, increments in residential units will only act as a way to scare off our target market and direct it to other destinations like Cyprus and Spain.”
Spain witnessed a slump of 8% in property prices over the same period in 2009, while Cyprus was one of the eight developed economies that fell short of providing data to Knight Frank.
“It does not necessarily mean that property prices have increased due to a bigger demand, although one cannot completely exclude that possibility. It could very well be that what effected such an increase is the higher price of material. The strength of the euro could also have had a bearing on the result.”
In contrast, president of the Federation of Estate Agents Ian Casolani said that although real estate prospects are not all rosy for 2010, “the trend has moved significantly towards luxury residential units – both for the local as well as in the foreign market.”
Casolani explains that “the demand for lifestyle developments is not as major a concern as some perceive it to be: besides the growing trend and desire for these properties, we have also been witnessing Maltese owners selling their villas to move into these types of apartments.”
He said the majority of large-scale residential developments that have been already launched have sold “pretty well”, and that “there is not all that much unsold stock after all”.
The mushrooming of luxury developments over the past decade led to a sudden increase in property supply, resulting in a major concern for developers not to be faced with unsold stock. Property development companies have therefore taken a different approach to large projects, where construction now takes place in different phases so as to increase the market supply gradually rather than launch all the projected units at one go.
“I would not be surprised at delays in the launch of new phases of construction throughout 2010,” an observer commented. “We no longer see adverts of new units available on the market. This is because developers are holding back on supplying new stock because they have to get rid of their old stock first. That way, they can get the necessary cash flow to honour their commitments and then have enough money to move on to the next phases. Some developments are still waiting for construction permits, and I am sure that some contractors will opt out of applying pressure on MEPA for permits to be issued fast since a time limit to start building would be imposed along with the issue of a permit.”
But GAP Chairman George Muscat, who launched all 380 units at Fort Cambridge at one go two years ago, begs to differ.
“Every contractor has a different opinion,” he said. “Personally, I don’t think the climate is so bad. No doubt, whoever is caught up with stock needs to sell before going on to new projects, but not everyone is stuck.”
Reportedly, more than two -thirds of the stock at Fort Cambridge has been sold and “works are going on at a fast pace, with target dates being fully met. It would not right for any contractor, or for the economy, if a construction process had to take long or in any way delayed or stopped,” he said.
On this note, Casolani added: “Most of the larger projects currently under construction have been cleverly phasing the launch of the different blocks or units and timing it to take into consideration the current market conditions, rather than having the whole development launched at one go.
“A few years ago these large projects launched all the units simultaneously – and a majority of them were sold, whereas nowadays similar developments are selling their first stocks before launching the final phases. This avoids flooding the market. This, however, does not necessarily mean that there is a slowdown in the demand for these types of property.”
On his part, Pender Place sales manager Michael de Maria says the indications are that 2010 will be a better year than 2009, “especially in the foreign market, while the local market still seems to be sluggish.”
The first residents will move into Pender Place by April this year while 8,000 square metres of commercial space in the financial centre of the projected complex have been sold to Fimbank, which will be moving in by end 2011. Over 80% of the 126 apartments available in the first phase of Pender have been sold on plan, while the next phase will be seeing the release of 16 small sized villas in the local market. Next, Pender is expected to deploy an additional 200 residential apartments, another 20,000 square metres of commercial space and 8,000 more square metres of office space.
“We too have noticed a trend of Maltese people moving out of their homes to purchase a property here at Pender,” he said. “The location here is very central and it is close to all amenities – that is one of the main factors.”
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