Shifting patterns in Malta’s rental market

Around 83% of all rental contracts registered in 2020 were with individuals of foreign nationality.

In a relatively recent trend impacting Malta’s housing market, a significant portion of the country’s rental sector is dominated by international tenants. According to data verified by the Housing Authority and shared with The Journal, around 83% of all rental contracts registered in 2020 were with individuals of foreign nationality.

This trend highlights the heavy reliance of foreign workers on Malta’s private rental market for their accommodation needs. The scenario is particularly noticeable among those who have only recently arrived in Malta or who intend to stay for a temporary period.

Further insight into this trend is provided by a study conducted by the Central Bank of Malta. The research indicates that the average duration of stay for foreign workers in Malta is relatively short, typically around three and a half years. Notably, approximately half of these individuals tend to leave the country after two years, underscoring the transient nature of this demographic within Malta’s housing market.

Sharing arrangements are changing

As of the end of 2022, the number of foreign workers in Malta stood at 96,970, marking a substantial rise of 20,575 compared to the previous year. The composition of these foreign workers has seen a significant shift over the years. Back in 2016, only 29% of foreign workers were third-country nationals (TCNs). However, by 2022, this percentage had escalated to 63% (or 58%, if excluding those from the UK).

This growing proportion of TCNs in the workforce also suggests changes in living arrangements. Co-sharing accommodations have been a common practice among foreign workers. Yet, there is growing anecdotal evidence to suggest that overcrowding might be a more pressing issue among TCNs, particularly those from African and Asian backgrounds.

Various studies, both local and international, have explored the reasons behind such trends. Factors such as discrimination, along with different preferences for work and leisure, play a role. A notable characteristic among some TCN workers is their inclination to save money to send remittances back to their families in their home countries. This often leads to a willingness to reside in relatively overcrowded conditions to reduce living expenses.

Under the latest reform to rental regulations announced last year, landlords will be restricted to registering a maximum of six tenants per dwelling. This is not only aimed to reduce overcrowding in rental properties, but also to boost demand for compliant accommodations and lead to greater stability and higher professional standards in the rental market. Landlords with larger properties might have to reconsider their rental strategies, such as focusing on family units instead of individual tenants. Click here to read more about the proposed amendments to the Private Residential Rent Law.

Active registered contracts are increasing

As of June 2023, the number of active, registered rental contracts with the Housing Authority reached 54,978. This figure signifies a considerable growth from the total registrations recorded at the end of 2020, which was a year after the rent register was established.

The rental market is becoming a pivotal factor in shaping the broader dynamics of the property sector. It influences various elements, such as property prices, which are affected by the demand for accommodation. Additionally, the rental market impacts investor sentiment and aspects like mortgages, particularly those related to buy-to-let investments. Moreover, it plays a role in construction and residential investment activities, which, in turn, contribute to an increase in the housing supply. This growing significance of the rental market underscores its integral role in the overall health and development of the property sector in Malta.

A 5.5% rise in rental prices

The Housing Authority’s latest comprehensive analysis of the rental sector’s pricing trends reveals a significant increase. Rents have risen by approximately 5.5% in the first half of 2023 compared to the same period in the previous year. This evaluation relies on detailed data regarding registered rents, factoring in various attributes like the type and size of the property, its location, and the nature of the rental contract.

Apart from the ownership sector, which includes first-time buyers and households relocating from one property to another, two other major demand drivers in the property market are long-term tenants, such as foreign workers, and short-stay visitors, like tourists in short-let accommodation.

A survey conducted by the Housing Authority in 2020 revealed that most landlords in Malta own only one or two properties. The survey found that for 85% of these landlords, rental income is not their primary source of income. A subsequent survey, undertaken in collaboration with the University of Malta and the Central Bank of Malta, supports this finding.

Nevertheless, while landlords owning five or more properties represent less than 15% of the total, they control a significantly larger proportion of all rented properties.

Photo: Anna Holodna

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