Rents for residential property fell throughout 2020, the Central Bank of Malta said, following slower growth rates in 2019.
Research conducted by Central Bank economists shows that growth in rental rates was slower in 2019 than in the previous year, although it remained high from a historical perspective.
In 2020 this annual growth turned negative, as COVID-19 wreaked havoc on the global and local economy.
The effect was already pronounced in the first quarter of the year, where advertised rental rates were between 3 and 3.5 per cent lower than they had been during the corresponding quarter of 2019.
The negative growth was more marked in the second quarter of 2020 as containment measures to address the spread of the novel coronavirus implemented all over the world, including Malta, led to a 11 per cent drop in residential rental rates.
The drop in rates, the Central Bank said, was driven by a combination of reduced demand and increased supply of rental units on the market.
The Central Bank’s analysis of the residential real estate rental market rests on the use of 'Big Data' from publicly available sources, allowing it to get a better understanding of the evolution of private-sector rents after taking into account quality adjustments.
The database now comprises 21,883 listings of advertised rental rates, and takes into account details concerning the type of property, location, size and other attributes that may have an impact on rental rates.
"Until the last quarter of 2018,” the Bank said, “the database consisted of solely two housing types - apartments and maisonettes - along with information about the locality in which the property is located and the number of bedrooms.”
"As part of a continuous effort to enrich this database, starting in the first quarter of 2019, this information was supplemented by the collection of data about penthouses, additional localities that were previously not incorporated and other observable property characteristics.”
"In particular, we started to collect information on attributes such as the availability of a garage, garden or pool facilities and instances where a property is advertised as being on or close to a seafront or enjoying some view," the authors of the article explained.
This approach can be used both for estimation of over/under-valuation of rental rates and to construct the growth rates of quality-adjusted private sector rental rates over time.
The Central Bank released other insights into the residential rental market:
• Relative to apartments, penthouses generally attract a premium of between 23% and 27%.
• Most of the properties advertised for rent are two-bedroom (40%) and three-bedroom (46%) properties. Around 12% of listings have only one bedroom, while a very limited number of properties (just under 2%) come with four or more bedrooms.
• Rental rates for two- and three-bedroom units stand at around 35% and 65% higher than the benchmark one-bedroom unit.
• The number of properties advertised as having a garage, garden or pool amounted to 3%, 1%, and 2%, respectively.
• A property close to a seafront commands a 15% premium, while the availability of a garage carries a premium of 13%.