As chairman of the Malta Developers Association, architect Michael Falzon finds himself in a perpetual balancing act. Some developers complain because of lack of progress registered and while the association pushes for things it tries to do so without being too aggressive

Speaking on the association he has been chairing for the past nine months, architect Michael Falzon said they have been in discussions with Mepa and the government over several issues but it takes a long time for things to move.

However it seems they have made headway for the introduction of rolling bank guarantees, meaning developers would in the future have a lump sum as a bank guarantee for all the projects they undertake rather than having to pay separate guarantees for every single project. It seems Mepa is discussing the matter with banks.

The MDA has also asked the Prime Minister and the Finance Minister for short term action regarding taxation and presented proposals to be considered for next budget - details of which cannot be divulged at this point.

Mr Falzon meanwhile referred to a small number of developers that ride roughshod over people’s rights as one of the problems the association faces. Yet it must keep defending the rights of developers without being interpreted as defending abusers.

“Unfortunately, a sector of the population thinks all of us abuse the law but we are trying to educate our members on this,” he asserted.

“This has been the biggest struggle we’ve had in the past nine months,” he acknowledged.

Over the last few years the property industry has been going through increasingly hard times, facing falling prices and an undetermined, large stock of unsold property. Mr Falzon said the situation is not worrisome but needs to be thoroughly studied and assessed.

Speaking in parliament on Monday evening, Dr Alfred Sant said Ireland’s economy collapsed as a result of the vacant property, and when taking into consideration our population, Malta has double that amount.

Development and the value of property had been a driving force for the Irish economy, he said. To some extent, development was also an economic contributor locally and the global economic crisis has left its toll on it.

“Alfred Sant took one particular statistic which in itself is interesting, and compared it with the local scenario but property in Malta is probably spread among more owners,” Mr Falzon pointed out.

Besides, the lending policies of Maltese banks were less liberal and more restricted than those of Irish banks.

Central Bank statistics show Maltese banks have €2.5 billion in home loans which are the safest kind of loan. It is very rare for Maltese people not to be able to pay as a result of the very prudent policies.

Loans to the construction and real estate industry amount to €1.5 billion. Other loans are meanwhile given to business that put real estate property as guarantee. A restaurateur would for instance put a house as a guarantee and this is the most problematic loan type because it would be difficult for a bank to sell the property, if one failed to pay the loan for its actual value in a timely manner.

This aspect should be incorporated in a study the Malta Developers Association is calling for and which it discussed in a press conference last week.

The study would classify property realistically according to the market segment it is targeted to and basically identify the actual situation of vacant property. The assessment should identify which properties are actually saleable to form a realistic picture.

Although at the press conference the association said the study would cost around €33,000, Mr Falzon clarified that only the preliminary stage of the study would cost so much and in its entirety, it would cost much more. He is of the opinion that it would have to be owned by the government and banks rather than themselves.

He pointed out that the rental market to foreigners is “a mess” with many property owners failing to declare rent while having their property classified as vacant.

After establishing the property stock and which market segments they appeal to, a marketing plan for each category would be necessary with special focus placed on the sector that appeals to foreigners.

So far, Mr Falzon said, both the government and banks said such a study would be interesting but no one has ever got down to doing it.

He pointed out that currently, low-end sales are going on well. Although first-time buyers perhaps with the intention of moving to better property in the future would be interested in the sector, it seems people are not moving out of these premises and the middle segment is stagnant. Semidetached villas and nice terraced houses are therefore not being sold.

High-end sales are also going on well.

“We don’t want money from the government but clear policy regarding taxation, planning and the sale of property to foreigners is much necessary,” Mr Falzon said.

Conflicting messages are sometimes given by the government, he noted, and although sales to foreigners are generally regarded beneficial to the economy, issues that crop up from time to time dictate otherwise.

A case in point is the Permanent Residency Scheme which has been dragging on for five months.

“Why?” Mr Falzon asked.

He understood it had been suspended because it was planned in the late eighties, prior to EU accession and certain things had not been foreseen. However, having the scheme suspended for so long gives the message the government is not interested in foreigners buying property in Malta.

Speaking from behind his Birkirkara office desk while playing with pencils and rulers, Mr Falzon then shifted the discussion to Urban Conservation Areas (UCAs). He explained people were moving out of these zones because old houses are not built to today’s standards and people find it very difficult to renovate them.

A rehabilitation scheme should be encouraged by the Malta Environment and Planning Authority (Mepa) but to the contrary, it makes it so difficult for people to get permits that development, meaning replacing a house by another house (not blocks of flats) does not take place.

A rethink is necessary with regard to policies that are clearly not working because unless policies change, we will have more area in Birkirkara, Marsa, Ħamrun, and Cottonera, among others, boarded up and abandoned, he said.

To avoid this from happening, he believes Mepa should perhaps treat interested persons in an advantageous way when it comes to permit tariffs, for instance.

“I want Mepa to look at such applications as opportunities for having a house becoming livable. Instead, Mepa is being too rigid in trying to preserve things not worth preserving,” he said.

“It needs to be more selective in what it wants to preserve”.

With reference to blocks of flats being built almost in every town and some villages, Mr Falzon said this has been brought about as a result of the Local Plan revision because building works three storey buildings started replacing two storey ones.

“Then if developers saw an opportunity, it’s good for them,” he said.

The raison d’être behind this was to curb applications in the periphery of towns and villages.

People blame this on developers and Mepa had said it was a result of ministerial input – a matter which has been acknowledged, he explained.

Mr Falzon had drawn up the Mepa legislation back when he served as minister and so I asked for his input regarding the Mepa reform.

“It has not succeeded much except in not issuing permits,” he replied. “It has made applications for legitimate applications so bureaucratically difficult that it has become a disservice to people.

Rather than changing the way things were done with emphasis on efficiency, it has shifted the waiting period to before an application is accepted for processing and consequently all sorts of applications have dwindled down.

As a result, even its income has declined considerably especially over the past four months so the government had to increase its funding. Yet its increased tariffs should have resulted in a self-sustaining authority.

For things to change, one has to be practical.

The procedures were drawn up on the suggestion of NGOs by people who don’t have any experience in development, its processing, the client-architect relation, and many other matters.

This is resulting in a situation in which people give up asking for permits and although it might appear as a big achievement to some blinkered NGOs, it opens up the possibility to have more works taking place without permits.

“Making it impossible for people to get permits because of absurd reasons is an incentive for people to break the law,” he said.

Profile

• Michael Falzon was born in Gzira in 1945 and graduated as an architect and civil engineer in 1969.

• He has served as Nationalist minister for the development of infrastructure, environment minister, as well as education and human resources minister in the late eighties till the mid nineties.

• He was chairman of the Water Services Corporation between 1998 and 2008.

• In September he was appointed chairman of the newly formed Malta developer Association.

• He recently also contributed to the divorce debate as member of Iva g]ad- Divorzju, Iva g]a\- |wie[.