Issue link: https://maltatoday.uberflip.com/i/1072992
17 maltatoday | SUNDAY • 20 JANUARY 2019 INTERVIEW own experience, that their members' businesses and liveli- hoods also depend on the value of property; in terms of mort- gages, interest on bank loans, etc. So, it's not just the Malta Developers' Association that has a stake in this subject… But that only makes the possible knock-on effects of market distortions that much more serious. It has been argued, for instance, that the ongoing construction boom (with all its 'distortions') risks generating an oversupply that might one day crash the entire market. Does MDA share that concern? As we said in that statement, we are concerned by any dis- tortion to the market. As things stand, the government has done a good job in managing the economy. We're in a situa- tion of almost full employment; there is a feel-good factor, busi- ness is going strong… this is all very positive. But I do feel we should also be planning ahead for a rainy day. Ultimately, no- body sells their family jewel- lery when they're well-off, and their businesses are doing well. People only sell their family jewellery as a last resort, when things are going badly. So with the economy booming, there is no economic justification to sell off public land for construction projects…? Not exactly: I am not saying that, because things are going so well… we don't need any more major public projects at all. Like it or not, all past governments have resorted to the strategy of fueling eco- nomic activity through major construction projects. It hap- pened in 1987; it happened before, in Mintoff's time. And it is happening today. And it has always been controversial, without a doubt. My concern is that, in the long run, this strat- egy could come back to bite us. And by 'us', I don't mean just the MDA, but the country as a whole. Because if the playing field is not level for everyone… if we create an oversupply… or if there is too much labour con- centrated in one part of Malta, at the expense of everywhere else… because this is another thing. We all already know there is a shortage of construc- tion workers. So if you have large numbers of workers con- centrated in one major project, it is only going to pile more stress and pressure on the rest of the industry. And this, too, ultimately has an effect on property prices, and the afford- ability of housing. But these are all things we already said in our statement. Now, I feel it is more prudent not to comment on any specific project, and instead to wait for the govern- ment's reactions, and for the outcome of the discussion. But it's not just 'this' or 'that' project: recently we have seen a whole spate of planning decisions which seem to favour mega-projects, often at the expense of entire communities. Wouldn't you agree that – with governments depending so much on construction for investment and employment, and with political parties depending on financial contributions from developers – the construction lobby wields far too much power in this country? No, I don't agree with that at all. It is the other way round, quite frankly. We have a lot of members who – to get what is theirs by right anyway, and even when they are abiding by all the policies and regulations – end up having to cede a lot of what is theirs, just to mitigate any controversy that might arise. Let me give an example: some- one buys land which is within the scheme; he proposes a plan which conforms to all the regu- lations; he undergoes an entire planning process… yet he still faces a whole barrage of com- plaints and objections: because traffic will increase, because of noise pollution, inconvenience, etc. So even though the devel- oper would have followed all the rules, in the end, he will still be asked to conduct a traffic im- pact assessment, for example… But aren't these all things that developers should be doing anyway? Are they? Why aren't traffic impact assessment studies car- ried out when drawing up the local plans? I'm not question- ing the fact that they have to be done… but when they are done, and by whom. When the local plans were drawn up, it was known that – in this or that area – the density of resi- dential units would increase from, for example, 40 to 100. In my humble opinion, that is when the traffic impact assess- ment should be done: before the policy is put into force. Not afterwards, when inves- tors are buying piecemeal. But having said all this: the devel- opers have never complained. They all undertake those stud- ies, at their own cost. They also pay for the infrastructure; they take out a guarantee to rebuild pavements, roads… You make it sound like these are unfair demands on the developer. Sorry, but if a developer digs up a road or a pavement to build a block of flats… shouldn't he be expected to fix it afterwards? It is, after all, the developer who will profit from the project… Yes, but the developer is held responsible for everything. Now: when a furniture removal van damages a pavement… who pays for it? I'll tell you who: the developer who built the block of flats, to which the furniture was being delivered. He has to take out the guarantee to fix any damage to the pave- ment, whether he caused it or not. But again, we all accept it without complaining. My only complaint is that these aspects rarely come out in public… Fair enough. Earlier, you mentioned 'planning ahead for a rainy day'. At present, the demand for luxury apartments costing millions of euro (or rental prices which are skyrocketing) is fuelled by a largely foreign community attracted here either by 'new industries' – eg, iGaming or financial services – or by the IPP 'Golden Passport' scheme. What would happen to all these new properties, if this category were to pull out of Malta in future… because of a change to the EU's taxation or citizenship policies, for instance? Wouldn't they all end up empty? I have never believed that a property, once built – espe- cially if someone invested large sums in it – will end up 'emp- ty'. Experience has taught us that certain projects, especially when it comes to residential units, are sold on plan, before they are even built… But surely that's only because the economic going is good. What about the rainy day scenario? Even when there was an eco- nomic slowdown, property was still viewed as a sound invest- ment. It's not that people didn't invest… it's more that those who did may have had to wait longer for a change to the eco- nomic climate, before selling. Some even did well out of it, because they bought at lower prices. Having said this, in times of recession or slowdown, it is generally only those who are already in an advantageous po- sition who are not adversely affected. We have also seen developers going bankrupt, be- cause they couldn't withstand the pressures of interest rates… So you do acknowledge that there is a risk of a market crash in case of a future economic slowdown? Let's face it… you always have to be ready for bad weather. You always need to have an umbrella handy. There are no guarantees. But if you are well- prepared – if all the measures are in place – you can handle the storm when it comes. On the other hand, if we all just assume that the economy will keep going the way it is going right now… clearly, that would be a mistake. One of our con- cerns is precisely that, although we have worked very hard to bring the economy up to to- day's levels, there is nothing to indicate that it will remain that way indefinitely. So it is pre- cisely now, when the economy is doing well, that we should be thinking about taking precau- tions for the future. Is that what we're doing, though? Are we really taking all the necessary precautions against a possible change in economic fortunes? Because it looks to me like the construction sector is going into overdrive – and even then, building a glut of properties that only millionaires can afford – when there is no guarantee that today's structures will even exist in future… But you're only looking at the high end of the market. It's not true to say it's only 'unaf- fordable properties'. If it wasn't for the private sector, there wouldn't be a housing mar- ket catering entirely for first- time buyers. It is only because private investors bought land – from private owners, and sometimes at high prices – and managed to attract a very large number of people who are just getting married, or who want to live independently… or peo- ple who wanted to buy a sec- ond home, and maybe put it up for rent. In reality, the Maltese developer has been hugely suc- cessful, in recent years, also when it comes to the afford- able sector. So to be optimistic, in answer to your question: we are confident that – just as we were influential in contributing to Malta's economic growth – now, we have to be influential also when it comes to getting ready for harder times. So that when troubles do arise, we will be able to handle them. And I'm optimistic that we will suc- ceed, too. PHOTOGRAPHY BY JAMES BIANCHI