Issue link: https://maltatoday.uberflip.com/i/878567
14 There never seems to be a shortage of things to talk about in the property/development sector. Malta is currently experiencing a construction boom, and questions are now being asked as to whether our national infrastructure is up to the challenge. But new buildings are not the only things going up at the moment. The rental market, for instance, has undergone a sudden and dramatic upward spike: with rent prices soaring by over 80% in some areas. Let's start with that for now: recently, Finance Minister Edward Scicluna dismissed concerns that the rental explosion constitutes a 'crisis'. He maintains that the market will regulate itself. In your own experience... is there a crisis? And if so, can it be resolved just by market forces alone? It depends what you mean by 'crisis'. In a sense, there is already a crisis in mainland Europe where the rental market is concerned; there always has been. In places like London and Paris, people pay more than half their salaries in rent. The main cause is a lot of outsiders moving into those cities to live and work. The same thing happens everywhere, including Malta. So the question is: are we willing to stop that? Or should we allow the economy to keep grow- ing: with new companies coming in, and more opportunities being created? The financial sector, the igaming sector... these are the sec- tors that are creating an explosion in the [Maltese] rental market... But there is a difference between Malta and a city like London. If people can't afford London prices, they can move out of the city and commute. In Malta – which is the size of a small European city – you don't have that option. To a certain extent, you do. If you look at the market within the Sliema-St Julian's-Ta' Giorni-Swie- qi area... these are definitely the most popular areas. To rent a two- bedroomed apartment in these places, you will have to pay around 800-900 euros a month. Yes, that's unaffordable... some people earn little more than that as a full sal- ary. Once you get to the outskirts, however... places like Fgura, Zab- bar; villages like Ghaxaq or Gudja... there is a possibility to find one- or two-bedroomed apartments in the 600-700 range... That's hardly 'affordable', to the people in the salary range you just mentioned... True. The only affordable area, in that sense, is Gozo. You can still rent a Gozo property for maybe 300/400 euros. But there's a rea- son for that: in Gozo, the demand is simply not there. It goes to show the power of demand and supply. However, I don't think we should be too concerned about the ex- ternal market: I don't think our social conscience should prick us too much if outsiders coming here can't afford to rent. They can always leave. I'm talking only about non-residents here... outsiders who come here to work; not Maltese citizens who have no- where else to go. In these cases, yes, the market will adjust itself. The better-paid workers will find rental accommodation; the poorly paid will end up leaving. Or else, they can go for shared accommoda- tion. In the UK, for instance, they are now building huge apartment blocks, and just renting out single rooms – say, a 10-sqm room with a bed and wardrobe – for £100 a week... in central London. Maybe we need to go in that di- rection as well. Maybe we need to reassess our strategy when it comes to supply. But personally, I don't think we should be over-concerned about the foreign market. There will always be solutions. It is the lo- cal market we should be concerned about. There, our social conscience should prick us: there is an issue, and I think we need to address it, and discuss possible solutions. I think the government has a huge responsibility: because it is the gov- ernment that is creating this eco- nomic boom. Of course, we thank the government for its initiatives in bringing so much money in from overseas... but then there is a snow- ball effect that has negative effects on the Maltese market as well... Yet the government has so far been reluctant to admit this. One of the reasons appears to be that the domestic rental market is still too small to be considered a major problem. Isn't this a little short- sighted, though? I was under the impression that the local market is growing at a fast pace... It is definitely growing... and it will keep on growing, for as long as our economy keeps growing. Peo- ple aren't coming here to buy... let's face it: if you move to London to work for a year, you're not going to buy a property there. You will rent. It's the same everywhere. Mean- while, more Maltese are renting too, for a number of reasons. One, because property is very expensive. Two, because young Maltese graduates are becoming more cosmopolitan: they want to keep their options open. Shall I stay here? Or go and work in Italy, France, the UK? The EU has given us these options: we are begin- ning to see ourselves as more in- ternational. So I think the culture of 20, 30, 40 years ago – whereby the norm was to live and work in Malta, maybe take over the family business, or find a job as soon as you graduate, etc. – I think that's all gone. Now, I think we're more adventurous. And to be adventur- ous, you need freedom. Property is a huge commitment. That is per- haps why people are taking longer even to settle down and have kids. There is more cohabitation nowa- days; people are living together be- fore they get married – regardless of what anyone out there thinks – more than ever before. To do that, you're not going to buy... you're go- ing to rent. Meanwhile salaries have remained largely the same, while the cost of renting has skyrocketed. Some have called on the government to 'intervene'... though the finance minister has so far ruled out any direct intervention. What should actually happen at this point, in your view? I totally disagree that the govern- ment should not intervene. I think it is the government's responsibil- ity, because it is part of the vision of government to create economic growth; they know that what they are doing is creating these reper- cussions.... So would you agree with the government stepping in to regulate increases in rent, for instance? No, that's not what I meant by 'intervention'. I don't believe gov- ernments should interfere with how the market actually works. But there are other things governments can do. One thing that Malta ur- gently needs is to build a lot more social housing... but good quality social housing. Money – a lot of money – has to be put into more social housing, especially for the most vulnerable families that simply can't afford a roof over their heads. We're not talking about vast numbers here... but we can't ignore them either. Subsidising rents in social cases might be another option, too. At the end of the day, however, I be- lieve that the government has a responsibility to ensure that sala- ries are increased. These problems arise not just because rental prices have gone up... but because basic salaries have not increased accord- ingly. Naturally, these are things that need to be discussed; I am aware that it's a delicate issue. But we definitely need to start coming up with solutions... Meanwhile, the influx of foreigners looking to rent has influenced not just prices, but also the kind of development that is now going up. We are seeing large residential projects – complete with in-house shopping centres, etc – replacing the more traditional apartment blocks. You yourself recently expressed concern that the market is expanding too far and too quickly. Are you still of that view today? I don't think we're tackling the challenge head on. For example: a lot more studies have to be carried out on the impact of new develop- ments on their neighbourhoods. Environmental impact studies; noise pollution; operational issues such as garbage collection, or park- ing bays for delivery vans... things like that. These problems already exist. There are already a lot of food and beverage outlets, restau- rants, cafes, etc, concentrated in small spaces. Wherever you go in the Sliema/ St Julian's area, you will see trucks and vans double-parked in the middle of the road, causing traffic jams. There is no alternative... we didn't plan for it enough. So I think the government needs to create a proper planning group to come up with operational solutions. Do we need to build more tunnels? Or reclaim land from the sea, to cre- ate more space? The problem is striking a balance between these needs and other concerns. Envi- ronmentalists, for instance, will oppose land reclamation because it destroys part of the seabed... and there are other similar issues. So Interview By Raphael Vassallo maltatoday, SUNDAY, 24 SEPTEMBER 2017 I totally disagree that the government should not intervene. I think it is the government's responsibility, because it is part of the vision of government to create economic growth; they know that what they are doing is creating these repercussions Maintenance is part of development, I believe very strongly in redevelopment, rather than new development. And much more than expanding development zones... which is a non- starter. I agree that there should never be any new development outside the existing development zones... REDEVELOPMENT RENTAL MARKET