Vacant properties and the economy

A great deal has been said about the abundance of properties that are vacant in this country, more so about properties situated in what are referred to as the core village or town centres. All too often the figure of around 23 of residential properties in Malta being vacant is mentioned.

In an economy that is very much hampered by its size (several are those non-Maltese who wonder how we manage to create so much economic activity in 121 square miles), vacant properties represent a wasted resource.

In the case of commercial premises, a vacant property would represent an investment that has not realised an adequate return. In the case of residential premises, a vacant property would represent an opportunity cost that may not be easily quantifiable, but in any case a cost.

With regard to residential properties, one needs to make the distinction between properties in localities that attract tourists and properties that are located in towns and villages away from tourist resorts. Residential properties in tourist localities could be summer residences for Maltese families or premises that used to be used for accommodation purposes for tourists and have now fallen into disuse. The latter are part of the tourism infrastructure and as such could be considered as commercial properties as well.

Then there are those vacant residential properties in localities that are not considered as tourist resorts. It is often claimed that, if these properties become available on the market, we would need to have less new properties being developed and localities would not need to be extended beyond current boundaries.

Thus, from an environmental perspective, it appears that it would be advisable that this refurbishment of existing properties should take place so that the few open spaces we have left may be safeguarded. The reasons why this is not happening may be two - one relates to the existing rent laws and the other relates to inheritance issues.

However, the refurbishment and subsequent utilisation of vacant residential properties in core centres of towns and villages would also represent an important economic gain for the country. Very often such refurbishment would not be carried out by large construction companies but by self-employed contractors. Thus, it is more likely that such construction activities would create jobs for Maltese persons than for imported labour (given the number of evidently non-Maltese present at large construction sites).

Moreover, it would give a boost to construction activities without having to develop land which is as yet unbuilt.

Another important benefit for the economy of such development is the repopulation of core village and town centres, which commercial outlets located there need. A number of commercial outlets in such centres have had to close down or downscale their operation because the market has moved away from them.

As town and villages sprawled into green areas, and town and village centres became depopulated, it became increasingly evident such commercial outlets no longer represented an element of convenience for their customers. The repopulation of town and village centres through the utilisation of vacant residential properties would once again create a market opportunity for commercial outlets located in town and village centres.

Most would tend to agree with such a line of reasoning. However, there is a question that remains unanswered. How can the government acquire such vacant residential properties? Should the government incentivise such developments? I believe that one has to let the price mechanism work in this instance.

The government should not requisition residential premises as a Labour government used to do in the 1970s. Nor should it provide subventions or fiscal incentives for such developments. It can however use the country's regulatory framework to encourage such development.

The basic lesson of economics, namely that resources are scarce and that one needs to maximise the use of such resources to create economic wealth, seems to apply to our economy. Our economy cannot afford a waste of resources, and vacant properties are one such wasted resource. It is not as yet fully appreciated that such a waste of resources contributes to a higher inflation rate and slower economic growth. Vacant properties are not only a social issue but also an economic issue.