Rental rates have probably increased, on average, by more than the official 17 per cent rate disclosed in the monthly inflation breakdown.
The estimation is the result of an analysis into how rental rates are calculated in the Retail Price Index, coupled with input from some of Malta leading real estate stakeholders.
It has long been recognised that inflation data does not capture skyrocketing rent prices.
An increase in food prices is the main source of Malta’s high inflation rate. In calculating the Retail Price Index, food is assigned a weight of over 20 per cent – meaning that one-fifth of Malta’s price stability index is driven by food prices alone.
Rent, on the other hand, is simply a competent of housing prices, which make up just 7.9 per cent of the total Retail Price Index. And rent, on its own, accounts for 1.08 per cent.
Changes in rental prices therefore have a limited effect on national measures of inflation, explaining why inflation remained so low for so long, even as Malta’s rental rates multiplied.
Buried in the data released by the National Statistics Office (NSO) about inflation, however, is the figure of 17 per cent – representing the year-on-year increase in rents from August 2022 to August 2023.
This 17 per cent increase represents a big jump on what were already being acknowledged as steep rates.
Indeed, the increasing cost of having a roof over your head has been noted by foreign companies, which have warned of an erosion in Malta’s competitiveness.
Meanwhile, talent that could previously be attracted to Malta with a decent salary and the promise of low costs will not need that salary to be higher if it is incentivise relocation.
Earlier this year, the Housing Authority released figures showing that rents were nine per cent higher in 2022 than they were in early 2020, prior to the onset of the COVID-19 pandemic. This increase has seemingly accelerated over the last year.
Responding to questions posted by BusinessNow.mt, the NSO explained that the actual increase for market rentals is likely to be even higher than the 17 per cent shown in its public records.
That’s because this rate includes rental prices for garages and for properties under rent control – the latter of which certainly saw increases far lower than 17 per cent.
The NSO confirmed that this means that the increase in market rents is actually more 17 per cent.
Real estate agents contacted by BusinessNow.mt confirmed this, indicating that rental prices seem to have risen by anywhere from 15 to 25 per cent, depending on the area and property type.
In fact, “generalising percentages across the board doesn’t help anyone as there are so many variables to be considered,” says Michael Bonello, CEO of Alliance.
“From our perspective meeting with landlords and tenants, we see the basic laws of supply and demand are driving rates higher for harder to come by properties, for example in the higher end of the market. Properties with outdoor spaces are more sought after and can command increasingly higher prices.
“Also, higher property purchase prices and higher costs of finishes are two other factors driving rents higher, as landlords try to retrieve some of their increased costs.”
Branch manager at Dhalia Marsaskala Konrad Sultana agrees that the increase in rental rates over a year ago is around 15 to 20 per cent for the areas he works in, while Damian Galea, director and co-founder of Northern Properties, gives a wider band of 15 to 25 per cent for rents in the central and northern areas.
Sharing information from QuickLets, QLZH co-founder and CEO Steve Mercieca shows that the average rent registered by the firm is 18.2 per cent higher than it was last year.
Adding nuance to the discussion, Mr Mercieca notes that there has meanwhile been a drop in new rental contract, explaining that this is likely a result of incentives for contracts of a longer duration.
Meanwhile, the trend for house sharing is showing no signs of slowing down, with the rental of individual rooms increasing.
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