Issue link: https://maltatoday.uberflip.com/i/1499169
maltatoday | SUNDAY • 14 MAY 2023 10 OPINION THERE is a famous quote – often erroneously attributed to Albert Einstein – that goes something like: "Insanity is doing the same thing over and over, and expecting different results." And much as I hate to say it... by that definition, Mal- ta must be one of the 'nuttiest' goddamn nations, on the entire planet! Take, for instance, the govern- ment's current plan to address the issue of 'property afforda- bility' (especially, where first- time buyers are concerned), by 'flooding the market with new- ly-built housing units'. If you'll remember, the Prime Minister made the announce- ment during his Labour Day speech two weeks ago: "The next step is to ensure that gov- ernment takes initiatives to build a strong stock of apart- ments at affordable prices, to target those who want to be- come home owners but cannot irrespective of the many initia- tives we have already taken..." But if your memory stretches back as far as mine, you might recall how former Prime Min- ister Lawrence Gonzi had an- nounced exactly the same sort of approach, to exactly the same sort of problem – in almost ex- actly the same words, too! – all the way back in October 2006. This, for instance, is an ex- cerpt from Gonzi's Budget speech that year: "While Gov- ernment continues to adopt a policy to encourage citizens, as far as possible, to own their own houses, Government is aware that there is a sector in society who cannot reach this aim without assistance. [...] During the course of this year, the Housing Authority offered 260 properties for sale at a sub- sidised price at a cost in excess of LM1.6 million. [...] The Au- thority is planning to offer for sale more than another 450 properties during the course of next year..." Sounds vaguely familiar al- ready, doesn't it? And so it should, really: for apart from being identical to the 'solution' being proposed by Robert Abe- la, in 2023... it was also the same strategy that had previously been adopted by Eddie Fenech Adami, Karmenu Mifsud Bon- nici, Dom Mintoff, and - quite possibly (because my memory doesn't stretch back THAT far, at the end of the day) - even George Borg Olivier, all the way back in the 1960s. Meanwhile, in an article pub- lished a few days after the 2006 Budget, former Housing Au- thority chair Marisa Micallef Leyson wrote: "There are a number of problems or ineffi- ciencies in the housing market right now. Firstly, prices are high and increasingly beyond the reach of first-time buyers..." And interestingly enough, she went on to specify exactly how 'high' those property prices were, back in 2006: "Average first-time buyer homes cost LM40,000 [E93,000] plus in a few localities and LM50,000 [E116,000] plus in others. I am obviously excluding luxury de- velopments. Loans are on av- erage at around LM10,000 less than this amount, so many are managing, but those on lower incomes, or no family help or less money saved in the bank, are having serious difficulties to get on to the property ladder..." Once again: all that should sound at least a little 'familiar', all these years later. After all, it was only two weeks ago that a report by Dhalia and Grant Thornton gave us a pretty clear picture, of how those same sta- tistics pan out in Malta's prop- erty market today. We were told, for instance, that: "With the average price for a finished housing unit stand- ing at €259,000, single-person households simply do not have the borrowing capacity to buy their own property, which al- ways requires a 10% deposit for banking finance..." And before you all pounce on me, to argue that there is obvi- ously going to be a HUGE dis- parity, between today's prop- erty prices and those of almost two decades ago... please note that we are talking about 'af- fordability', here: so what mat- ters is not so much the extent by which property prices have increased, since 2006; but rath- er, how 'affordable' those prices are/were, compared to the av- erage person's ability to actual- ly pay them. On that note, the Dahlia/ Grant Thornton report ob- serves that: "A single person on a median income looking to buy an average-sized prop- erty in Malta can only borrow around €160,000 from a bank to fund their purchase. This is almost €100,000 below the av- erage price of a housing unit in Malta [...] Two people earning a minimum wage can only bor- row around €145,000, render- ing the average housing unit unaffordable..." And also, that: "Despite the slow growth rate, prices still remain higher than what they were in 2019. Housing prices were going up at an average rate of 15% per year up until the pandemic. Since 2020, prices have still grown, but at slower rates..." Got that, folks? It seems that – 17 years after the former Nationalist administration had tried 'solving' the housing affordability problem, by 'in- creasing the stock of housing units on the market' – oh, look! Not only are today's housing problems entirely analogous, to what they used to be back then... but the price of property itself has simply continued to rise, inexorably, at a pace that far outstrips the corresponding salary-increases over the same time period... ... and on top of all that: the disparity between property prices, and bank mortgages, has actually increased to an all-time high, in the meantime. In other words: where, in 2006, Maltese banks would lend median-in- come earners enough to cov- er around 75/80% of the total property value (LM30,000, for a property worth LM40,000)... today's mortgages will on- ly extend to around 60% (i.e., E160,00, of a E260,000 price- tag.) Effectively, this means that today's first-time buyers – even on an average salary (let alone, the ones on minimum wage) – have considerably less pur- chasing power, than they've arguably ever had before. And this, notwithstanding all those countless 'affordable housing projects' that have been under- taken, by successive govern- ments, since at least the early 1970s... At which point, we find our- selves confronted with a couple of awkward questions. Start- ing with the one I asked in the headline. I mean... seriously, though. Given that the exact same approach has always en- joyed such a consistent rate of abject failure, in this country... why do Prime Ministers like Robert Abela (and all his prede- cessors, over the past 40 years) keep resorting to it, regardless? If you ask me, however: the truly difficult question to an- swer, in all this, is... WHY, ex- actly, does this strategy even keep failing, at all? Why is it that no amount of 'cheap, af- fordable government housing' – unleashed onto an already over-saturated property mar- ket – has ever had the desired effect of... well, actually 'push- ing the price of property down, instead of up'? Because - in theory, at least OPINION Where does Robert Abela get this idea, that 'more lower property prices'? Raphael Vassallo