The consultants for Sliema’s upcoming 32-storey monolith, the Townsquare project, have certainly not beaten about the bush in spelling out the demand for more property.
Writing in their environmental planning statement for the project spearheaded by Gasan, the consultants clearly state the adoption of the euro in 2008 will fuel demand for property and even “appreciate” prices, while forecasting most of the new dwellings will still be vacant for a substantial part of the year.
Assessing the economic demand for the 242 new apartments envisaged in the Townsquare development, the developers’ consultants – ADI – clearly stated that Euro adoption “is expected to significantly support the local property market.”
They quote official Central Bank estimates indicating there is some Lm500 million outside the official banking system still in circulation.
“This money will have to be converted to Euros, bringing it out into the open. In other countries that have adopted the Euro, this has resulted in significant increase in the demand for property with consequent appreciation in property prices.”
ADI also state the anomaly in rental legislation in Malta keeps the booming property business “buoyant”. While acknowledging the oversupply in vacant property in Malta, ADI contend that the market’s “continued buoyancy” is due to “current rent legislation” and the fact that housing is considered as a prime investment vehicle by the Maltese.
They added that the purchase of property by foreigners is sufficient to maintain high prices in this sector. “Even though the volume of property purchased by foreigners may be a small percentage of the total property sales, it is enough to keep sellers hopeful of a good deal, especially in the upper price ranges.”
The number of dwellings in Sliema has increased by 2,500 since 200 – with 1,100 new dwellings solely located in Tigné.
However, 29% of Sliema dwellings are vacant. ADI said the addition of a further 242 dwellings will further increase the supply. The authors suggest supporting the oversupply of housing in the area with “vigorous marketing both within Malta and abroad.”
They also said that dynamics of the property market in Sliema does not follow traditional models, where demand is driven by household formation coupled with investment opportunities. They refer to a common perception that property in Sliema is a “good” investment. “Real Estate agents report a steady demand for good quality (luxury) property in the area from both local and foreign investors.”
Projects like Portomaso, in St Julians, 65% of which is owned by non-residents, has aided the sale of property on the foreign market. “The trend appears to be continuing with the MIDI, Tas-Sellum, St Angelo Mansions in Vittoriosa, and other smaller scale projects.”
Given the very small increase in household numbers experienced between 1995 and 2005, the local demand for accommodation to live in, as opposed to a vacant dwelling retained for investment purposes, is not likely to be sufficient to support the Townsquare project, ADI claim.
But market demand for the new project could be fuelled by younger buyers seeking to relocate to a trendy area like Sliema. Ultimately the new project will need to be well supported by local investors or by foreigners investing in second homes. “Either way, the majority of the stock is likely to be vacant for a substantial part of the year,” the EPS consultants claim.