Issue link: https://maltatoday.uberflip.com/i/1107757
OPINION 23 maltatoday | SUNDAY • 21 APRIL 2019 Property sector keeps marching on Michael Falzon micfal@maltanet.net THE results of the survey on rents published in 'Maltatoday' last week were hardly surpris- ing: everybody is aware of the phenomenon of ever-rising rents but few people actu- ally consider this a personal problem. Most people in Malta own their own home or live in residences where the landlord is the state or rent is protected by law. High rents hit a very small number of Maltese peo- ple – mostly those between 18 and 35 i.e. those of marriage age. This means that the rise in rents affects mainly non- voting foreigners and Maltese 'people are hit only to a much lesser extent.' A Eurostat study published on April 11 found that the value of property in Malta rose by 6.2% when compared with the year 2017. In fact, the price of property has been rising in practically all EU countries by an average of 4.2% increase. The rate of increase of property prices in Belgium, Germany, Denmark, the Netherlands, Austria, Cy- prus and France were all less than the increase in Malta, while the rate of increase in prices of property in Slovenia, Latvia, Czech Republic, Spain, Ireland, Luxembourg and Portugal was more. Prices in the property market have been constantly increas- ing over the last number of years – something that also results from a recent KPMG report (Construction Industry and Property Market Report 2018) written at the behest of the Malta Developers Associa- tion (MDA) and sponsored by Malta's three leading banks. There is, no doubt, a benefi- cial side of this unprecedented boom. It has resulted in a lot of construction hassle to the detriment of people living in the areas affected but it has also brought many unused properties into the market and has upgraded entire neglected and rundown areas especially in Sliema, Gzira and Msida. The average house-owners – who are neither developers nor traders – have seen a me- teoric rise in the value of their house, something that has nothing to do with developers but is the result of scarcity of developable sites in Malta. The property development industry is a booming phe- nomenon that keeps spreading outside the traditional Sliema/ St Julian's area like a diesel spill on water, as it grows big- ger and bigger. While people talk of being suffocated with new buildings, only one-third of the area is built-up in Malta (the fraction is even smaller in Gozo) and new development is mostly an increase in the concen- tration of housing units in already developed areas rather than new buildings in open spaces – despite some people's perceptions No doubt, the KPMG report is a professional job that proves very much what we already know. While the MDA is to be congratulated for deciding to review the original study every year, it must be said that the 2018 report based on 2017 statistics, is already a bit late. I hope that the next report based on developments in 2018 will be issued in a few months' time. The report shows that in 2017, the total direct employ- ment generated by the con- struction industry amounted to 19,478 full-time equivalents (FTE) while the indirect and induced employment reached the figure of 31,580 FTEs. These figures indicate an in- crease over previous years. Industry operators indicated that in 2017 the demand for units outweighed the sup- ply capacity of the industry: market forces are pushing the construction boom. The rental market, of course, figures strongly in this scenar- io – as the report says: 'Con- sensus appeared to be that there is an insufficient supply of rental properties priced at under €1,000 a month and virtually no supply of proper- ties available for less than €600 per month. This has given rise to a phenomenon whereby individuals would share a single apartment between a number of persons to reduce rental cost to fit an individual's budget.' While this arrangement is popular among the lower- paid foreign workers cur- rently in Malta, this does not suit newly-wed couples who are the people that are finding that renting an apartment is a non-starter. Housing affordability was also tackled in this report. It concludes that general afford- ability has declined as property prices have risen faster than incomes. Households earning the median income in 2017 increasingly faced the need to allow for certain trade-offs such as locality and size to fit their budget. I would suggest that in the next report, KPMG should include a deeper insight of the first buyers market as well as the fact that the cost of rents seems to stall once they reach €1000 monthly, irrespective of the qaulity and standard of the unit. Studies on how increases in rent could impinge on other sectors – such as the competi- tiveness of the Maltese gaming industry – should also be part of the report. Another aspect that should be interesting would be the nature of the end-user. How many units are bought by the actual end-user and how many are being bought in order to be rented out? Buy-to-rent has become a lucrative investment that involves a lot of small landlords who see property as an investment with the best return in the current financial scenario. The report also confirms that the price of land – including price of old property to be redeveloped – is the main fac- tor driving growth in property prices. This means that were it not for the relaxation in build- ing heights, the lack of supply of land would have caused an increase in pressure for building in ODZ areas. This would have been practically impossible to resist for any administration – something that is not realised by environ- mental NGOs who think that the problem is simply one of greedy owners of developable sites, greedy developers and greedy landlords. These attitudes, based on simplistic perceptions, contrast sharply with the way the MDA seeks to get a professional analysis of the actual situation in the prop- erty sector. The problems are much more complex than what many think. Perhaps, the peo- ple who are writing the next update of the report – for 2018 – should engage a sociologist to make this report more in- teresting to the general public. To my mind, renting property in Malta has social limits that, so far, remain undefined. Add to this, the demand for rented properties as a result of an ever-increasing number of foreigners working in Malta. Contrary to the short-sighted perception that the MDA is just a set-up made up of greedy persons who are in ca- hoots with the powers that be in order to become richer, the decision to review the original 2016 report annually reflects the seriousness with which MDA works. Ten years after it was found- ed, the MDA is set to remain the voice of the construction and property sector, irrespec- tive of the economic situation in which Malta finds itself. Ten years after it was founded, the MDA is set to remain the voice of the construction and property sector, irrespective of the economic situation in which Malta f inds itself Everybody is aware of the phenomenon of ever-rising rents but few people actually consider this a personal problem Photography: MICAELA PARENTE