The Malta Independent 21 October 2018, Sunday

The rental market

Simon Mercieca Monday, 8 October 2018, 07:41 Last update: about 12 days ago

In 1865, a cholera epidemic broke out on  the island and Dr John Sutherland working for the War Office was asked to compile a report on the sanitary conditions of Malta and Gozo. It was published in London two years later, in 1867. In this report, Sutherland had the following remarks to make regarding the housing conditions of the village houses in Malta at the time.

"In one of the small enclosures at Żebbuġ, we saw a woman and four children. Her husband is a blacksmith, who earns about a dollar a week at his trade. The woman herself earns about 5s. a month by weaving. Out of this they have to live. Their house rent is 2l[iri] a year. There is the usual manure room in this house, into which, besides the filth of the household, as much filth is accumulated as can be collected. About two loads a year are obtained in this way, and its total value was said to be 3s. a load. When cholera was in the village two of the inmates of this house were seized, and both died." (p. 38)

ADVERTISEMENT

Sutherland focused most on the sanitation facilities in the Maltese homes of the period. The causes of cholera were very well known by then and were linked to urban squalor. But in his observations, Sutherland made an interesting point. He included the cost of renting a house in  Żebbuġ in the middle of the nineteenth century. It was quite a high sum for those times.

On Wednesday, 19th September, I attended a national conference organized by the Malta Institute of Management on the rental property in Malta and the rental market. Even though, this seminar was mainly addressed to developers and persons in the property business, there were quite a number of interesting points that I wish to share with you.

The main message was that the rental market in Malta is not a bubble. It is not yet high when compared with other rental markets in other parts of Europe. The comparison was made with countries of Malta’s size such a Gibraltar. Long lets in Malta are cheaper.  People, in Malta, normally rent houses or apartments which are completely furnished. It also transpired that the rental market of high value properties is not going up and it seems that this type of business has reached saturation point.

But unlike the nineteenth century, optimism is high. This optimism was expressed by the Government, but by all those who participated in the seminar, including the representative of the Opposition.

In brief, the idea is that the housing market in Malta remains affordable. By housing market, the participants meant both the rental as well as the purchasing market. The reason given is that Malta’s economy is doing well.

Perhaps, I would add that it is doing well with that section of the population that normally owns property. In other words, the category of individuals that twenty or thirty years ago were looking for a terraced house has remained unchanged. The current prices of terraced houses are still affordable today for that same buyer that used to buy them thirty-years ago. This may appear controversial and I too would tend to question this.

What was missing in these statistics is age. In other words, thirty years ago, youths in their twenties thought of buying their own property. Today, are individuals in their twenties still thinking of buying their property or are they starting thinking of buying property at a later age?

It should be pointed out that the number of persons owning property in Malta has increased. At the turn of the twentieth century, only 30% owned their property. The rest were in rented property. By the end of the century, this figure was reversed. 70% owned their property.

A number of reasons were given to explain why the property market was going through a sustained growth. At the same time, it is still being considered affordable. The economic growth was one but there were many others, including the Government fiscal stimulus, which were explained as healthy fiscal policies. The growth in population, bidding between investors, loans approval by banks and oversupply of homes were other reasons given to explain this sustained growth.

Yet, those present admitted that the current rates are difficult for those looking for social housing. Perhaps, in the nineteenth century, the individuals renting such a property as Sutherland describes would not have qualified as a social case. What Sutherland is stating is that the people of the countryside had to have more than one job to be able to pay their rent. Both the husband and wife worked to keep up with their rent and living expenses.

But those present were assured that even if, there are social problems, the current government will continue to recognize the right of owning property. This is an important statement because past Labour Governments had a history of requisition orders of private properties. Expropriation or requisition of lands for social services are no longer on the government’s agenda. This is good news because these measures in the past had a devastating impact.

Today, the right of property is going to remain a priority for this government. Yet, a balance is needed with regards to families passing through hard times. This was a point of concern for both the Government and Oppostion. But this concern was even expressed by all those present, including the Malta’s Development Association. While what may appear as oversupply of homes can continue to guarantee that the housing market remains affordable, there is no intention from the government to resort to expropriating land, while there is still no clear strategy as to how government intends tackling the social problem.  

It was here where Sandro Chetcuti, who was one of the speakers at this conference, made an interesting proposal. On behalf of MDA, he urged government to come to an agreement with the private sector to build affordable housing for social cases. He even suggested that government issue bonds that would be bought by the private sector to subsidise building social housing. Other interesting schemes were aired by Chetcuti. These were based on a transparent relationship between the government and the property developers! Yet, these proposals are challenging.

Nevertheless, it became abundantly clear as the conference unfolded that there is too much work in the construction industry on island, and property contractors are not interested in getting involved in government building projects. This was demonstrated by facts. Basically, government cannot rely on contractors to build affordable housing. When government issued tenders, the  bidders’ offer was too high. Contractors prefer to work on their own projects rather than enter into partnership with government.

At this point one may wish to consider another option; setting up a Land Bank. This proposal should be seriously studied by all stakeholders. A Land Bank can offer quality properties and at the same time ease the demographic tensions propelled by social dynamics. This is the type of structure that can help our economy to move to a new level of productivity, which can meet social needs. 

A Land Bank can continue to encourage home ownership, which is an important element for our property market. Speakers admitted that it was home ownership which saved Malta during times of slumps and economic crisis.  A Land Bank can help bring these empty properties back onto the market.

With the ongoing rental prices, it is foolish to leave property lying empty. But still, there are quite a number of properties that are being left empty. It is time that all the stakeholders start considering this option as it offers feasible and practical solutions both to social housing and property built for commercial purpose.

Finally, the rate of income from rented property was calculated to amount to 5%, which is approximately the rate that a bank gets today from commercial loans.  

 

  • don't miss