ARTICLES

7th April 2006 - Low-cost airlines and the local property market

'What on earth have low cost airlines get to do with the local property market?', you might ask. They will play a large role in the future, is the answer. There has never been a more exciting time in the history of real estate in Malta.

A number of large-scale projects in the pipeline are destined to change the culture that has dominated the property construction industry for decades. And more big projects, with high-rise buildings, squares, landscaped gardens, and gyms are being planned.

For these to be successful, a foreign element in ownership is crucial, because the local market is unable to absorb all the proposed units. From experience, the biggest barrier to foreigners purchasing in Malta is the cost of getting here. Nobody wants to own a holiday home and then spend Lm500 for a family to get here. It is more feasible to book an all-inclusive holiday elsewhere for the same price.

Contrary to popular perception, foreigners are not banging on our door to buy here, but the foreign market needs to be aggressively fought for - especially now with the Eastern European emerging markets.

What are the benefits of foreigners owning property in Malta or Gozo?

Well, for one, the more ownership of property means that the owner would feel the need to visit quite often to justify that ownership.

Family and friends would be offered the use of the property, further multiplying the visitors to our islands - visitors who might ordinarily have gone on holiday elsewhere.

The fact that accommodation is free entails them to opt for Malta or Gozo instead. They would still spend a considerable amount of money on restaurants, entertainment, museums, etc. Just because accommodation is free does not signify that less is spent. Few are those who go on holiday to cook at home.

The benefits to our economy would be substantial

What is hindering all this?

1) A lack of awareness of Malta - low-cost airlines would increase awareness, it is in their interest, and they would need to do so to survive as their viability depends on traffic volume.

2) A huge cost to get here, compared to competing holiday destinations. A reduced travelling cost would substantially increase the volume of sales to foreigners.

3) The low-cost airline industry would encourage more overseas purchasers to invest in a buy-to-let investment, as the volume of visitors would increase, and so the chances of rental increase likewise.

4) Low-cost airlines would provide a more frequent, scheduled service to cash-rich destinations like Dublin, Scandinavia, etc. Presently hardly any of these are served by Air Malta and other airlines. These people have the money, pensions, and cash to buy property in Malta and elsewhere.

Are we going to discuss for years while other countries take advantage? Will the decision be political, or will it be in the interest of Malta and Gozo? We hope for the latter. But we also fear the former.

Source: Courtesy of the Federation of Estate Agents