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It’s beyond supply & demand Projecting the Maltese rental market into a newer dimension
It would have been a missed opportunity had the work done in preparation of the White Paper on rent not been used as a first attempt to understand the whole dynamic of the local property market. Now that we are so close to its publication, we are in a better position to describe the anomalies currently manifesting themselves in the private rented sector as a multidimensional problem. Such anomalies became noticeable when a few years back our economy began to expand greatly in a wave that created thousands of jobs, thus inducing larger flows of migrants from diverse income brackets.
This occurred at a time when changing social patterns led to a growing number in single households whilst the booming tourist population on the island started to rely increasingly on private accommodation. These phenomena set development permits rising, however, unguided as it was, the real estate market swelled.
The property market did start producing a supply that matched the main commercial interests, but not necessarily the needs of the all the categories of tenants. KPMG’s report, commissioned by the Malta Developers’ Association underlined that there indeed is a hole in the market for affordable dwellings.
The estimated figure of 22,000 vacant dwellings indicates that the argument of supply is rather limited. There are planning restrictions and costs that are too high to renovate and make old derelict buildings available on the market, or at least adapt them to the market’s present needs. This government has started to address the situation with the Housing Authority’s scheme of granting €25,000 for the renovation of dilapidated dwellings which in turn will be added to the social housing stock.
Beyond the matter of supply and demand, it is a question of what kind of supply is required to meet the present demand. The Secretariat is thus actively exploring methods aimed at diversifying the market in order to boost the supply of affordable dwellings whilst, however, not neglecting the difficulties faced by the current participants in the local private rented sector. The current supply shortage certainly cannot justify the increasingly reported market abuses nor may it entitle those in a dominant position to derive undue advantage.
As things stand it is clear that the private rented sector is in need of management since it is the only route towards making the relationship between the landlord and the tenant more professional and transparent.
In the period of consultation with stakeholders, multiple representatives of the private sector showed that the local private sector embraces regulation that ensures fairness, transparency and stability.
When we speak of stability, we do not only refer to the stability direly called for by tenants, who simply cannot be made to pack and relocate at every next rent increase. We are also referring to the stability of the property owner and the investors who ought to be able to predict their medium- to longterm return while operating in a market that offers stronger guarantees. Only through better and clearer agreements that allow tenants to make the rented dwelling a home for their family, that foresee increases in rent, and the applicability of notice periods, can the market give better assurances.
Throughout the public consultation of the White Paper, I will explain how the model we are proposing does well to ensure that the growing rental market will become a housing alternative. It does not mean that this government is relinquishing its declared objective of enabling more people to become home owners, but a changing society has changing needs which need to be considered.
Unlike previous administrations whose plans lasted from one election to the next, this government is brave enough to help set up structures that shall outlive it. Through its new strategy Government is not only seeking to alleviate the current pressures faced by renting households. Its ambitions span to the stabilisation local market for generations to come and, more in general, towards a professional approach of the local property sector.