Issue link: https://maltatoday.uberflip.com/i/878567
maltatoday, SUNDAY, 24 SEPTEMBER 2017 4 News YANNICK PACE AS Malta takes stock of a rental market whose soaring prices are raising concerns on affordability by locals, it remains unclear as to whether the Labour administra- tion is willing to tackle the prob- lem. Earlier this week, finance minis- ter Edward Scicluna insisted that the market would adjust itself in time – a hands-off approach that may not reflect Prime Minister Joseph Muscat'sviews on protect- ing tenants against rising prices, in a meeting with the Malta De- velopers Association. But the MDA's president San- dro Chetcuti sounds a confident note that the government is "in- telligent enough" to steer clear of any rental controls in the up- coming Budget, a move he claims would herald economic disaster. "I am convinced the govern- ment is intelligent enough not to kill the cow that gives it milk," he told MaltaToday, adamant that market intervention was not the answer. "I understand the government, because it has a dilemma given that it has people unable to af- ford a house and who have a wage that is only just enough to live on but isn't low enough for them to qualify for housing schemes," he said, adding that he was sure the government was determined to continue seeing the economy grow. "It must solve these types of problems intelligently." Malta's property market ex- ploded in recent years, with high tourist numbers boosting the short-stay rental market, and a growth in both high-skilled and low-skilled workers from Europe fuelling the demand for accom- modation. Over 13,000 migrants settled in Malta in 2015 alone. Additionally, the sale of passports under the IIP became a factor in rising real estate values. Central Bank data shows prop- erty prices have risen by 36% since 2010. A promotional book- let for Malta's bid for the Eu- ropean Medicines Agency also revealed the spread of rental prices across the island: a three- bedroom apartment of up just 130 square metres could fetch up to €1,169 rent in Central Malta; in the south the price goes down to €693. A one-bedroom flat costs €700 monthly in the centre, down to €382 in the south. "Malta has to decide whether it wants less development, or more affordable rents," Chetcuti sug- gests, presenting a stark choice. Despite calls from civil society for some form of government in- tervention, finance minister Ed- ward Scicluna this week echoed Chetcuti's sentiments, saying only policies that increase prop- erty supply could temper rising prices. "The demand is greater than the supply, so policies need to be aimed at addressing sup- ply so that the market can cor- rect itself," Scicluna said. "Rents went up for a reason, and in the same way they went up they can go down." Chetcuti insisted that rent con- trol remains "out of the question". "This would just open the door to the black economy, to a dis- aster," he said. "The government can't – and we won't let it – dic- tate the prices of the private sec- tor," he said, adding that it didn't seem like this was the govern- ment's intention anyway.It can increase or reduce taxes and can be generous with its own money, but it can't do the same with oth- er people's." Abroad, some countries have regulated their rental markets through a points-system, or rent- al price indices, and even cap - ping annual increases – measures that have not brought down the property market. Chetcuti insists landlords are "protected by EU law" against such regulation. "It's 2018, you can't do these things. How can it be? No sir, not accept- able anymore. I'm sure that if the government tries to do this it will face strong opposition and it will break the economy." Evidently not a fan of market controls – Chetcuti says it's "like a limit on people's salaries" – the MDA president believes, like Sci- cluna, that supply had to increase on the market. One such meas- ure, he claims, is the reintroduc- tion of key money (rigal) paid to landlords as a lump sum when renting out property in the long- term. "If a landlord is given €10,000 in key money on a €120,000 apart- ment rented out for a period of five years, it would be a good way forward," Chetcuti says. Land- lords, he believes, could have "peace of mind" that they are not going to lose money if their ten- ant damages the apartment, while at the same time, ensuring that tenants have a rent that is stable for the duration of the agreement. Paying a lump sum of €10,000 over a five-year period amounts to a €2,000 a year, or €166 a month, which would be added to the monthly rental price – not an insignificant increase. Rental control? 'Don't kill the golden goose' Joseph Muscat talks a good game on rising rental prices, but his finance minister has ruled out rental controls, and one of his big supporters, Sandro Chetcuti, is adamant that market intervention would spell 'disaster' "The government can't – and we won't let it – dictate the prices of the private sector