It is a credit crunch scenario. The world's Stock Markets are taking a bit of a hammering at the moment with falls in excess of one per cent being an almost daily occurrence. Companies are reporting large falls in profits; shareholders' dividends are falling; and Banks are not paying out that much in interest on their savings and deposit accounts.
But given this doom and gloom situation of falling investment prices, what explains the fact that the price of property continues to register a steady and healthy increase with such consistency? The reasons are as simple as they are varied.
The main reason seems to be that property is linked to stability. Of course, in countries where the supply of housing can be increased simply by freeing the amount of land that can be built upon, a negative equity can be registered. Yet in those countries where housing supply is limited, negative equity can never apply.
Malta, for instance, is the perfect example. The main island measures just 27 by 19 km and only 21 percent of the land can be can be built upon, which means that the supply of housing is very finite. So when you have a migration from the Stock Exchanges or Funds into property, there is a guarantee for the increase in price.
Other factors apply. Owning a house gives you a certain amount of satisfaction that a piece of paper (like a Share Certificate) cannot compete with. There is the actual, physical enjoyment of something very large and solid with the accompanying primordial instincts of security, shelter and abode that a house gives you. In addition, a property not only gives a current return in the form of rental income but also a capital return in the form of capital appreciation on its disposal. In Malta, if a property has been in your possession for over three years and is declared as the primary residence, there is no Capital Gains Tax due. So owning a house or apartment gives you a greater and more tax efficient vehicle than most other investments.
The safety of the property market and buying property as an investment is further augmented by the plethora of very stringent checks and balances that are inherent in the building trade and housing market. Malta has had a documented and enforced building code as far back as 1600 in the form of Code Rohan, the earliest precursor of today's Malta Environment & Planning Authority, complete with the associated legislation, quality controls, Building Inspectors and Enforcement Officers. The University Course of Architecture is one of the longest graduate courses, with a high drop-out rate and very stringent entry qualifications. Here an Architect automatically graduates as a Civil Engineer too.
Add to this the fact that we have been rated as the happiest people in the world, (Register of Scientific Research on the Subjective Enjoyment of Life, Professor Ruut Veenhoven, Erasmus University, 2007); Malta's ranking as having the best climate in the world and the second best place to retire (Global Retirement Index and International Living Magazine, 2007); 10th in the world for Medical Standards (World Health Organisation); and the lowest Crime rate in Europe (Europol 2006), it comes as no surprise that the investment in property in Malta is known to be one of the best kept investment secrets around. With most European Capitals being just two hours flight away, is it not time that you got in on the act too?