38 · MONEY
ISSUE 61
ECONOMY
Jordan is an economist and a portfolio manager for a local asset management company.
COVID-19 AND ITS BEARING ON THE REAL ESTATE MARKET Let’s be frank—the unprecedented situation brought about by COVID-19 put the entire globe to its knees. Its anonymous emergence surprised many to how one should approach such uncertainty, both from a health and economic perspective. Jordan Portelli explains.
Personally, this new phenomenon conditioned the way we socialise, the way we work, the way we consume, and possibly many other habits to which we had to adapt accordingly. Inevitably, these changes in habits have negatively impacted the economy globally, with selective sectors being hit more than others. Domestically, tourism was the harshest hit, however other sectors, such as real-estate, are feeling the pinch too, given that signs of cracks were already showing prior COVID-19. Over the past years, Malta registered above-average growth, primarily due to significant foreign direct investment the country managed to attract. This inbound in investment had a positive impact on a diversity of sectors, amongst which was the real estate market, with the letting market being at the forefront in registering exponential growth. Indeed, many investors reaped the benefits of this growth, as returns were more benevolent than those being offered by financial markets, given the current low yielding environment. The latter proved to be a source of support for many to leverage themselves and invest in the
property market, which continued to uptick prices. Before COVID-19, the property market was possibly showing signs of a peak, following a record year of 12,885 approved application in 2018. Despite in 2019, the number was on the high side (12,484), a decrease of 3.1% was registered. In all fairness, the exponential trend of approved dwellings over the past years was a clear sign that eventually supply will overtake demand. Thus, the relatively stabilisation or softness in prices comes to no surprise. Moreover, overpriced properties have experienced a price adjustment. COVID-19 inevitably piled more pressure on the property market, predominately on the letting segment. As previously mentioned, the uptick in pricing was brought about by the remarkable influx of foreigners working locally, which effected the long-let segment positively. Also, the high demand of the shortlet business, to which many locals found to be another attractive source of investment, is feeling the pinch. COVID-19 has impacted the former given the uptick in unemployment, mainly in the tourism industry with many
foreigners previously employed within the sector re-immigrated. The latter was harshly conditioned by travel restrictions, as inbound tourism hit its record lows in history. A pinch is also being felt in the office space letting segment. As said, COVID-19 has changed the way companies view the remote working proposition. Over the years, such ideology was a taboo, predominately by local companies. However, as COVID-19
