MDA’s Chetcuti welcomes upcoming government measures to stop abuse in rental market
● MDA commissions study which finds ‘no signs of a property bubble’
Head of the Malta Developers Association (MDA) Sandro Chetcuti welcomed the Prime Minister’s warning-sound that the upcoming budget will include measures to ensure a higher degree of “professionalism” (serjeta’) in the rental market.
Prime Minister Joseph Muscat was addressing a press conference where the MDA presented a study it commissioned on the construction and housing market. The study does not delve into the issues surrounding the rental market, however Muscat gave special attention to this in his comments.
He revealed that the upcoming budget will create a framework to safeguard tenants and landlords from certain abuse, and will be a step in the right direction. Muscat acknowledged the MDA’s resistance to rent caps, but said it is unacceptable that landlords increase their prices exorbitantly on a sudden basis.
Muscat said that uncertainty by both landlords and tenants, especially because court disputes take years to conclude, is resulting in landlords inflating prices to create a cushion for them in the eventuality that a tenant creates serious problems.
In view of the MDA’s clear position against rent regulation through price capping, The Malta Independent spoke with Chetcuti to get his initial reaction:
“I enjoyed hearing that the PM understands and acknowledges landlords’ concerns. The thing that worries me most is government interfering with the free market, however I welcome any form of regulatory measures that ensure a higher level of professionalism (serjeta’) in the rental market industry.”
He added that he also welcomes any regulations which ensure “fewer cases of abuse, less greed and provides long-term availability for some tenants, especially those tenants who are a family unit.
“MDA has several proposals to address the government’s concerns about the rental market, which are not invented but are a reality.”
Property Bubble
Chetcuti said there is no sign of a bubble in the housing market, let alone signs that the bubble could burst. This sentiment was echoed by a representative from KPMG, while Muscat expressed joy at the findings reaching the same conclusion as the government’s own analysis.
He said the report dispels certain myths, indirectly referring to concerns of a property bubble brewing, and highlights certain problems.
It was found that a single person earning an average income of €14,400 (after tax) qualify for a mortgage on a property with a maximum value of €95,300. When looking at a property database with roughly 13,000 listings, only 2.7 per cent fall within this category, mainly one or two bedroom apartments in the southern harbour region.
On the other hand, a couple with a minimum wage of €17,600 (after tax) qualifies for a mortgage for a property with a maximum value of €117,000, representing 11 per cent of the aforementioned database.
This information highlights the plight of low income earners who wish to become home owners, especially within the context of rent prices skyrocketing.
A housing affordability scientific analysis however found that, especially with respect to apartments, the issue of affordability has improved significantly since 2006. While the price of land and housing has gone up since 2012, the affordability could have improved through lower unemployment and other factors.
An analysis was carried out on vacant properties, where the report urged for the non-consideration of such dwellings to be “part of the supply of available properties”. From 2011 figures, it found that vacant properties tend to be either dilapidated, unwanted or caught up in inheritance disputes.
“42 per cent of total unoccupied properties are classified as seasonal or secondary use with the remaining 58 per cent completely vacant.”
Turning to gross value added for the economy from the construction and property market, direct, indirect and induced output translate to €2.55 billion translated into roughly 15 per cent value added as a proportion of the total value added produced by the Maltese economy.
This contributes to roughly 37,275 jobs created directly or indirectly within this sector. Chetcuti described how this translates into one in every seven workers being engaged with the construction and property market, directly or indirectly.