The Malta Independent 23 August 2019, Friday

Housing situation: the planners need to start planning

Giulia Magri Sunday, 21 April 2019, 10:15 Last update: about 5 months ago

Over the past few years, many have remarked on the increase in construction, housing prices and the stagnation of minimum salaries. Time and time again, data and statistics reflect this increase in property prices, both with regards to sales and letting; as recent statistics show that house prices in Malta have increased by 3.1% in the third quarter of 2018, which was the second-highest in the EU. The Malta Independent spoke to Douglas Salt, of Frank Salt Real Estate and president of the Estate Agents section within the Malta Developers Association about increasing house prices, landlords violating rental laws and the future of the housing situation in Malta.

Is the current construction boom the island is undergoing reflecting the demand in property?

It is reflecting the demand, yes. Prior to 2012, there was a slowdown in the property industry and a limit on the supply. Then the government, on the instigation of the MDA started ‘First-Time Buyer’ schemes, which led to a rush of first-time buyers. This, in turn, led to many of these first time buyers only have the option of buying on plan; which many people do not like doing but they were constrained to. The construction industry realised there was more mobility and more turnover and started putting the wheels in action to increase the supply of property. Construction takes time, you need to find a good site, wait for permits and also find a contractor, you have around two or three years before the construction actually takes place.

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Currently we are in a situation where prices have gone up, and there has been a rise of 25-30% since 2012. Prior to 2012, the affordability ratio was below 100, which meant that property was affordable. Today the ratio had reached by 100 per cent or even slightly higher in certain areas, so although it is still affordable, there has been an upsurge in prices.

So how affordable is property today? There has been a lot of discussion about how difficult it is to find affordable property; not just for foreigners but also first-time buyers. A majority of recent graduates will also continue living with their parents because they cannot afford the prices on the market.

It was always very difficult for the first-time buyer, what has changed from when I was a first-time buyer is that young people save much less, and therefore they find it much harder to put forward the 10% deposit. The tendency is to spend money which you don’t really have. When I was a first-time buyer, when you worked you saved. The culture of saving up today is a bit different.

Would you say there is also there is a huge increase in sales and letting prices; but then salaries are stagnant and not increasing. Wouldn’t it be ideal for the market to adjust itself and for prices to drop to be more realist and affordable?

I wouldn’t say that salaries have remained stagnant. In my own company, the staff’s salaries have gone up phenomenally. What will happen is that once prices have gone over the point of affordability and owners won’t be able to sell, they need to correct the price here and there. I think we are at a stage where prices need to stabilise, but one must remember than 70% of the value of property is just the site alone.

To be clear: there is affordable pricing, just not in high end central areas, but if one looks outside of these areas there is affordability. This is an issue which is not just happening in Malta, but all over the world. If people refuse to budge in regards to location wise than they will find it very hard to accommodate.

What would you say of the current housing situation?

The lower end has reached a peak in pricing, whilst the high-end property will always remain on the high end, but there is a limit on how much you can price. The price of high-end property is based on the person you are attracting to the island and their budget. So far, we have not been successful in attracting huge volumes of multi-millionaires; foreigners who mainly come to live here are typically middle-class and have a moderate price budget.

A group of migrants was recently arrested in Qormi after police raided the flat. While the attention is all on the migrants, what about the landlord who allowed them to pay to live in inhumane conditions? What is being done to monitor landlords?

There is a White Paper being discussed; but you don’t need to wait for a White Paper to change. If the Government wishes to enforce, there are sanitary regulations which dictate how many square metres there needs to be per inhabitant so if these are clearly breached the authorities should stop them.

In this particular case they were here without a work permit, and therefore if you are doing something wrong, it is difficult to go to the authorities.

But then there are also cases of 10 to 15 people living in an apartment meant to for three people. How is this affecting the housing situation?

As estate agents, we do not come across 15 people in an apartment. We do coordinate flat sharing, because this is not a Maltese phenomenon.

I mean, in Spain they are renting pods, which is just a bed, for €250 a month. We do not wish to be in this situation, but flat-sharing is fine, as long as it is within the acceptable norms. If 15 people are into an apartment which is not meant for so many people, yes it is unacceptable.

But one cannot simply intervene in the market, you can policy the market and use regulations that are already in hand and stop people from renting out their properties to 15 people at a go.

That way you are intervening but not fully intervening in the market. If there is not enough manpower, it will need to be beefed up.

What about the White Paper under discussion?

This is not going to solve many issues. There are two types of Maltese who cannot afford rent.

Firstly, there are those who will never be able to afford rent, and it is up to the State to accommodate them and provide social housing.

Then there are those who are temporarily in a bit of a situation, who might have separated or who might have sold a property and cannot afford to buy another property so you need to rent. The Government is already addressing those types of people, and I believe the budget has provided some generous subsidies for these cases.

You will start seeing a correction because most of the property which was bought on plan will soon be entering the market.

It will address in the middle section and the prices will be arranged. But what needs to be done is to address the lower end of the market, which does not exist anymore. Here we are speaking of prices of €400 to €600 a month. The MDA has come up with one proposal where the Government lends land for a period of time to a contractor, who will build the accommodation and base his return on his costs and the land. Based on that, the rental rate will be much less, around €450 a month. One has to think outside the box to address these issues.

This whole housing issue opens a Pandora’s Box into many different arguments and situations. Some people believe the rise in property prices is due to the influx of foreign workers. How can we find a balance of the increase in demand of workers and property prices not sky-rocketing?

The market corrects itself, but it takes time. We have turned everything upside down and topsy-turvy in five years. It is the tweaking of planning laws, making decisions and going higher in certain areas and lower in others. One needs to create the space, now how one does it is one thing but I would definitively rule out using up more virgin land. You need to then decide which areas will build higher, you cannot just go higher in every location since our roads are so narrow, therefore one needs to also widen the roads, because it would be suffocating.

One needs to bite the bullet and start planning for the future. At the moment we are not planning long term, but just in five year stints.

What do you believe the housing situation will be like in the future?

I believe the pricing will adjust itself. There definitely has to be a rethink about how we develop, someone has to sit down and say look, in this area we will build just high-rises as we need more accommodation, but then we need to widen the roads in this area. It has to be a coordinated effort. Currently, they are allowing the planning of high-rises where ever and addition of floors here and there. The planners need to start planning.

So would you say we have more of a construction issue?

Every time you release another floor in an area; that area becomes a building site. So Swieqi was settled, but now you have more construction once again. To just add another floor on a whim, you end up affecting the whole area. You need to also make the infrastructure pleasant as well.

Also, families are smaller now and the accommodation we demanded in the past is no longer relevant today. If people are used to living in 140 square metres, but you are a family of two, you do not need so much space to live comfortably.

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