Property prices, property problems

The recent increases in property prices have led to a spate of articles, press releases from minority political parties and even cartoons in l-orizzont.

Should we be concerned at the rise in prices? Certainly. But can't we also be a little more realistic? The situation is not terrible for everyone. Indeed, for the large numbers who own their home, and for those who do not even have a loan on it, the rise in the price of their property has positively influenced their family's wealth.

Even those who have only bought a property within the last two years have seen their investment grow comfortably. And when they compare it to renting, which costs even more than the repayments on a loan for an equivalent property, these couples too are in the main pleased with their investment.

The Labour Party has so far not come up with proposals to control property prices, at least not officially. But a cartoon on l-orizzont on Saturday showed a high-rise building above the caption: "To go up high is the only way to lower prices!"

This is a common perception but a very mistaken one. After all, building heights in Malta have increased dramatically in the very years that we have seen the most dramatic increases in price. The oversupply has grown (although not of the kind of properties that people want or can afford) and yet prices have continued to spiral upwards. So high-rise is certainly not the answer.

This is to say nothing of the "uglification" of Malta (which Martin Scicluna has been patiently reminding us about for years) which more indiscriminate high-rise building would lead to.

Alternattiva Demokratika, on the other hand, harp on the fact that, if the 30,000 empty properties could be brought onto the market, demand would somehow be dampened. This seems plausible but it is not. Most of the empty properties are not the kind that first-time buyers are seeking.

AD's economic spokesman suggested we should subsidise interest rates. Had he done his homework properly he would have found that the Housing Authority does offer such a service, and has for years, but the impact of it has been negligible lately because interest rates are low and may go lower if we adopt the euro. In fact, cheap interest rates have, I believe, contributed to the rise in house prices, as has the impact of the millions of liri repatriated and reinvested in property.

I think we should do five simple and sensible things:

First, to have a greater supply of affordable housing for the new young couples who may be finding it difficult to buy their first home, we should promote a system of planning gain. We don't need to copy the UK system but we should investigate how, in exchange for a permit, we could have developers supply some units to the government at cost price. The Housing Authority could then channel these properties through its strict and transparent system to those who need it, those who can afford to buy but not at the current cost.

Second, new government investment should be directed at shared ownership. People could go to the Housing Authority and buy a share of the property they can afford. Perhaps they can only afford to borrow Lm10,000, equivalent to, say, 25 per cent of the value of a home. After all, today's struggling, engaged couple may become tomorrow's well-off family. We are piloting such a scheme but to provide a lot more of these units would require more investment from the government.

Third, for those living on social security and the genuinely struggling mothers who are unable to fork out a lot for their housing needs, we must use more of the small, old and unoccupied units scattered all over Malta. We could start by making use of government and Church properties now lying vacant.

Putting large groups of people with problems into large new housing estates causes more problems than it solves. There are plenty of smaller properties around which are not worth a fortune and these should be brought into the cycle.

Fourth, as older people are often the ones living in inferior housing, let us build, or convert buildings into, small self-contained flatlets where they can enjoy security and accessibility at a far lower cost than living in a five-star old people's home.

Fifth, certain areas, particularly Valletta and The Three Cities, should be zoned off as areas where special and particular action can legally be taken with respect to the many crumbling buildings, dangerous balconies, substandard homes and great housing needs that exist there. Here, the private and public sectors must work together.

All these measures would require new government investment. There is no such thing as a free lunch and the much-vaunted private-public partnerships cannot tackle the very complex area of property prices and housing demand on their own.

Ms Micallef is chairman of the Housing Authority.