Issue link: https://maltatoday.uberflip.com/i/741600
7 YANNICK PACE THE cost of buying or renting a home is an expense that takes up a large part of people's income. But it is also an expense that has been steadily increasing in the past years, and one which has contrib- uted in no small part to some who are struggling to make ends meet. A MaltaToday exercise to find out how big the increase in rental prices has been in Sliema, Mosta and Mellieha between 2010 and 2016, with data obtained from classified listings in the Sunday Times of Malta, showed at least an 80% price increase for Sliema alone. Over 350 individual prices were collected from print and online adverts, with prices divided by the number of bedrooms advertised. While the amount of data col- lected might not be a perfect representation of rental prices nationally, the prices – from clas- sified listings appearing on the first Sunday of March and the first Sunday of October of each year – give a good indication as to how difficult it is to find accommoda- tion in a particular locality for a given budget. There is a significant increase in price in each locality however, ac- cording to the data collected, rent- al prices in Mellieha and Sliema have gone up by over 80% over the six-year period. A big part of the reason for this increase is the influx of foreigners into Malta. Economic growth has brought with it an increase in for- eign workers and this has in turn created a greater demand for ac- commodation. While this is to be expected, there is some fear that if current trends persist, some may be priced out, with little chance of finding affordable accommodation. When contacted, Francis Spiteri Paris, managing director at Perry Real Estate Agents, agreed that the increase in rental prices has been driven by foreign workers and didn't think the trend would be changing soon. "Maltese people don't rent, they buy. It is foreigners who really rent properties. The truth is we are moving closer to European prices, foreigners are used to these types of prices. I would even say that we're still cheaper than most other countries," Spiteri Paris said. In his Budget Speech, finance minister Edward Scicluna an- nounced that from next year, rent- al contracts of more than three months will have to be registered with the Inland Revenue Depart- ment. This could potentially lead to a further increase in prices, with landlords who had previously not been declaring their full earnings now being required to do so, and therefore increasing prices in or- der to maintain the same profit margin. Spiteri Paris however said that from his experience the vast ma- jority of people are registered with the authorities, insisting that the measure will not affect rental prices. Spiteri Paris also disputed pro- posals for capping rising prices with controls. "You can't have a property worth €3,000 and tell someone that they can only rent it out for €2,000: it doesn't makes sense," he insisted. With rent prices unlikely to be capped in the near future and property prices expected to in- crease further, it remains to be seen how the government will ensure the availability of accom- modation that is affordable to the public. TIM DIACONO Schemes announced in the 2017 Budget risk backfiring and inflat- ing the property market further, former Housing Authority chief Albert Buttigieg has warned. Speaking to MaltaToday, Butti- gieg – now a St Julian's councillor and PN election candidate – high- lighted three schemes that could see property prices continue to rise –the doubling of rent subsi- dies, the extension of the first-time buyers' scheme and a stamp duty cut on property purchases in Gozo. He also warned that a pilot pro- ject to encourage landlords to rent properties to low-income earn- ers on seven-year contracts risks fuelling fears that the government will eventually requisition private property. In an attempt to ease the burden of inflated rent prices, the govern- ment will as of next year double rent subsidies for low-income earners living in private proper- ties – from a monthly maximum of €83 to €166. The means test to assess who qualifies for the scheme will also be "drastically revised", rendering eligible for the scheme even those people who have over €10,000 in bank deposits. This is expected to see some 2,800 people qualify for the scheme, double that of the current 1,400. In an attempt to clamp down on tax evasion of rental income, the doubled subsi- dies will only be eligible to tenants who present copies of their rental contracts. Moreover, the government will next year introduce a "system" that will require all new or renewed rental contracts for three months or over to be registered with the Department of Inland Revenue. Landlords who fail to register their contracts will be subjected to fines contemplated in the income tax legislation. However, Buttigieg warned that tax-evading landlords would in all likelihood compensate for their new tax burden by increasing rental prices, thereby negating the doubled subsidy. "There's a risk that the scheme will backfire. Developers love money and schemes such as dou- bling rent subsidies entice them to raise prices. While I disagree with the black economy, I also disagree that tenants should be made to shoulder this new tax burden on landlords." Prime Minister Joseph Mus- cat has admitted that the scheme could incentivize landlords to kick up their prices, but insisted that all rental contracts should be regis- tered with the IRD, as promise-of- sale agreements are. Buttigieg has also warned that the property market is being in- flated by a tax exemption scheme for first time buyers that will be ex- tended for a third consecutive year in 2017. Indeed, the Central Bank recently identified the scheme – along with the Individual Invest- ment Programme that requires new Maltese citizens to invest at least €350,000 in property – as one of two main triggers for the recent rapid rise of property prices. The bank's data shows that property prices have shot up by an average of 24.8% between 2013 and the first quarter of 2016. "Essentially, developers have re- alized that first-time buyers are now saving up to €5,000 in stamp duty and are raising the prices of property," he said. "The tax sav- ings are not being absorbed by consumers, but by the developers." Buttigieg recounted how, as Housing Authority CEO, he had actually turned down a call by the Malta Developers' Association to introduce the first-time buyers' scheme out of concerns that it could contribute to inflation in the property market. Rather, the gov- ernment at the time opted to sub- sidise a portion of the bank loan's interest for first-time buyers. "First-time buyers had saved up to €14,500 on this scheme, more than they are saving through the current scheme, and it didn't in- flate the property market as it by- passed the developers entirely," he said. Buttigieg also warned that anoth- er Budget scheme to slash stamp duty on all property sales in Gozo, from 5% to 2% throughout 2017 risks heralding frenetic constric- tion on the sister island. "The scheme will increase prop- erty prices in Gozo, but could also ruin its character. Now that Malta has been fully built up, eyes are turning onto Gozo. The Gozitan economy shouldn't be based on construction, but rather on tour- ism." In the Budget, the government also announced a pilot project to encourage landlords to rent their properties out to low-income earners on fixed seven-year con- tracts in return for a reduced 5% tax on rent income. However, Buttigieg warned that there will be landlords who are likely to look at this scheme as being one step away from the return of requisition or- ders. "That mentality exists among landlords, particularly those of a certain age who remember the requisitions, and there's a great risk that these people will start re- fusing to rent out their properties to Maltese people." maltatoday, SUNDAY, 23 OCTOBER 2016 News One year free bus pass to 18 year olds @MaltaGov THIS IS A PAID ADVERT Sliema rental prices up 80% in six years Former housing chief: Budget schemes will inflate property prices Cost of renting single bedroom (Euro) 2010 2011 2012 2013 2014 2015 2016 Sliema €279 €332 €392 €373 €368 €459 €512 Mellieha €163 €182 €161 €197 €198 €253 €311 Mosta €173 €164 €186 €180 €174 €246 €291 Albert Buttigieg insists tenants should not bear the brunt of new tax burdens that could be imposed on their landlords