Property price indices in Malta : an analysis

Abstract

Property price movements are a major concern in most economies worldwide. In Malta, where land for construction is relatively scarce, prices surged considerably in the last decade. This was corroborated when Malta recorded the highest percentage rise in property prices in 2004 amongst the European Union (EU) member states. Rising property prices have a significant bearing on household wealth and private consumption. Furthermore, they may also have an impact on inflation since asset price movements can be a prelude to an upward movement in consumer prices. In addition, movements in property prices constitute an essential element in the decision process for architects, buyers, investors, developers or any others in the market. Thus, it is clearly evident that property price movements must be monitored in order to capture the developments in the local property scene which is vital to various participants in the market. Property /House Price Indices are used to monitor developments in the market. Various statistical techniques and methodologies are available to compile these indices, all of which have differing levels of accuracy and data sampling requirements. For these two reasons, not all methodologies are suitable for all markets. This is more the case in Malta, where the sample of property sales is small. In the local scene, the Central Bank of Malta (CBM) and the National Statistics Office (NSO) publish their own property index. In this study, these two indices will be analysed and compared to other foreign indices with the aim of exposing both the merits and weakness, in view of, aiding the construction of an accurate measure of price movements in the future which will be a useful tool for the architect in his/her property valuations.