The Property Market addressing the core issues – Tonio Fenech

Recently the PM expressed satisfaction that 80% of the population have become richer thanks to the increase in property prices. Sounded like we should we thankful to this untamed property inflation period this country has gone into. If indeed 80% of families are “richer”, this was thanks to policies of previous Governments from both sides of the House who pushed policies focused on home ownership making normal families owners of their own home at affordable prices and which today have become unaffordable.
Let us also appreciate that if 80% have notionally become richer the remaining 20% significantly and really become poorer, some even homeless.
Also, 80% of the notionally richer 80% (taking the Pareto principle) may own more expensive homes but their wealth has not really increased, as selling you expensive home to buy an alternative home that is equally expensive effectively leaves one neutral not richer.

Not in this statistic are our immediate future families, so called first time buyers looking for a reasonable home, who also are worse off as they cannot afford a reasonable home and make ends meet, as both buying and renting a property has become unaffordable.

The stories that tell the difficulties that young professional couples are facing in acquiring a home and reported by the Times of Malta on the 23 September put another serious concern on the present situation. The young professionals interviewed concluded that it is becoming more affordable to move abroad (avoid completely this over-crowded and over-congested island) then buy an expensive low quality property in Malta. These professionals’ annual income as a couple was claimed to be around Euro 55,000, clearly not on the lower side of the average income, and yet they can’t find a decent apartment. If they can’t make ends meet, what about those first time buyers that average Euro 25,000 to Euro 35,000 a year, indeed the more common? These people are trapped in poverty as going abroad is not really an option.

The untamed rise in housing prices is causing serious economic risks to our country, outpricing ourselves economically, an over-heated economy, and so on. However, there is another risk called brain drain. As cheap labour continues to relentlessly fill vacancies, today even in the professional sphere, accounting, IT, etc. the youth we have educated with our taxes at University, MCAST or ITS are considering leaving this island as with the qualifications they hold they can get better jobs in other EU countries and afford to buy or rent reasonable homes in places that offer a better quality of life.
The market is not fine, there are other consequences beyond the mere buying and selling or renting and the commissions and profits that estate agents and developers make. It’s not fine for the low income earners, the first time buyers, and those becoming poorer.
At the pace of growth in prices, the only hope for average income earners is that this bubble will burst unless Government seriously provides not only social accommodation, but equally important affordable accommodation for first time buyers and other average income families seeking a more adequate home.

Frankly, the MDA’s PPPs proposals are no solution. Why should the Government give free land to the private sector to provide housing units at Euros 400 a month when building such these units through the Housing Authority the contractor can get his fair share of compensation of around €55,000 for a 3-bedroom unit that the family can repay through a home loan that will cost the occupants merely Euro 250 a month for 20 to 25 years. Frankly why should MDA and the likes be given an extra Euro 150 a month for every unit built rather than passing that benefit the families.

The strategy to address the housing challenge is not rent controls, or limiting who buys and sells what and to who as again the MDA proposed when in alluded to some New Zealand model. The real solutions can be found by understanding what made the so called 80% richer, i.e. state run home ownership scheme.

I urge the Government to restart building adequate housing units, that are affordable to average income families and first time buyers and build the units needed for social housing. Only such a policy will tame market prices, as it is market based. Reframing from building housing units and assisting first time buyers to buy from the private sector when there was an oversupply of property and reasonable prices, made sense, but this is not the reality today and so government policies must change accordingly.

Secondly Government needs to address the income disparity that property inflation and the import of cheap labour has caused. Malta’s economy cannot be deemed successful if it remains reliant on cheap labour. We rarely see Maltese waiters because Maltese cannot afford to sustain their family at such pays and therefore they prefer knocking on the Minister’s door for a job. In the meantime, hotels and restaurants boast of ever increasing profits (good luck to them) while paying peanuts in wages because the Government keeps allowing them to fill their staff shortages with foreign workers willing to work for peanuts for a couple of months.

Joseph Muscat when Leader of the Opposition had advocated in favour of the living wage. We are in an economic situation that merits a serious but short discussion. If developers are running this country and making Euro 4 million from every apartment, they should at least be obliged to pay more fair compensation to their workers and also contribute more to the national coffers to attain social justice.

These are the touch decisions that low average and income families, first time buyer and the poor are expecting from this Government, and not a white paper that will propose restrictions on who sells to who and buys from who merely to continue benefiting the big developers that seem to want everyone to buy only from them after ruining the life of everyone around them with their mega towers.

This article appear as an Opinion piece on the Sunday Times of Malta of the 7th October 2018.

Tonio Fenech is the Coordinator of Catholic Voices Malta


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