Budget measures supporting traditional properties not expected to push prices up

Measures supporting the purchase and renovation of properties in a traditional style, announced in the 2022 Budget, have been met with applause, with one real estate agent describing them as “fantastic”.

In the speech announcing the measures included in the Budget for next year, delivered in Parliament on 11th October, Minister for Finance and Employment Clyde Caruana placed emphasis on the preservation of Malta’s architectural heritage.

For properties that have been built for over 20 years and are vacant for more than seven years, for properties that are in an Urban Conservation Area (UCA), and for those new properties that are built in a style typical of traditional Maltese architecture, capital gains tax and stamp duty on the first €750,000 of the property price will be removed in its entirety.

First time buyers of such properties will also receive a grant of €15,000, or double that if the property is in Gozo.

Renovation is also incentivised, with the VAT paid on the first €300,000 in restoration and refining costs returned through a Government grant of up to €54,000.

“It’s an amazing scheme,” says Steve Mercieca, co-founder and CEO of Zanzi Homes and QuickLets, in comments made to BusinessNow.mt. “The heritage of these buildings should definitely be protected and promoted. It’s a fantastic scheme to push people towards these properties.”

He explains that he does not believe the measures will cause the price of such properties to rise further, pointing out that they are already expensive.

Iggy Zammit, director at Belair Properties, described the “big incentives” as a medium to long term strategy aimed at the renovation of old derelict properties.

“It’s another good measure that encourages investment in UCAs and redevelopment of older property, which is very much needed.”

He says that although the grant of €15,000 is not a very large amount, especially when considering the prices such properties tend to fetch, “when coupled with the tax exemptions and the VAT refunds it will definitely encourage youngsters to make this move”.

Mr Mercieca agrees, noting that the upkeep and maintenance such properties require, along with their price, ensures that demand is lower.

“There are fewer clients for these types of properties,” he says. “So this is definitely incentivising people to go for these properties, which are the biggest part of the heritage we have left, architecture-wise.”

Another measure aiming to bring homeownership into reach for more people is the extension of the Equity Sharing Scheme, through which the Government is sharing 50 per cent of the home equity of people over 30 years old.

The age for eligibility for this scheme is down from 40.

Mr Zammit says the scheme is “a great incentive to lower income earners”.

“It is very important that our youngsters can afford to get onto the property ladder,” he says.

Mr Mercieca concurs. “This measure gives people a boost so they can then take that first step onto the property ladder.”

He says it is aimed at people who could not previously afford property, such as those who have not entered into a relationship, or have left one, so they are looking to buy a property on their own. This gives them the boost to be able to take that first step onto the property ladder, a step he believes everyone should take, quoting a Maltese idiom: “invest in stone”.

Asked what the cumulative effect of these measures on the property market is expected to be, Mr Mercieca is quick to point out that there isn’t really something one can define as “the property market”.

“The property market is not, in itself, one market,” he says. “It’s segmented into areas, prices, property types, and most importantly, age of build.”

“So will prices increase? That depends.

“Do I think that new apartments are going to take a hit? Definitely not. Are they going to keep going up? Maybe not. They will probably remain as they are.”

On the other hand, he believes villa prices will go up. “In the years to come, I believe there will be greater demand for higher end houses with outside space.”

As for properties in older buildings, especially those without a lift, which in certain areas were getting a good rent, Mr Mercieca believes a correction is very much due, explaining that many properties were previously getting a good rent because there was no supply.

“Now the supply has increased. There are new flats on the market, so obviously, the ones which were overpriced will now get their actual value.

“If they’re getting their actual value, their return on investment (ROI) on the rental income will not be as good, so their value will automatically be corrected to what they should have been before.

“Inflated prices as a result of lack of supply will go down,” he concludes. “That lack is not there anymore.”