Land economics

Malta lies between two important continents, Europe and Africa; it is endowed with a temperate and sunny climate, attractive harbours and bays; and is surrounded by the clear blue Mediterranean sea. Though the Knights' surveyors in 1530 described it as rocky and barren, it used to support large tracts of cultivated fields and greenery. In their time the Grand Masters planted trees and created large gardens for their personal enjoyment. Grand Master La Vallette used to hunt in the promontory known as Mount Sceberras, which he then built as the island's city bearing his name.

Malta's biggest problem is its land scarcity; its geographical land area is only 315 km2, making it one of the smallest nations of the world. Being under foreign domination for most of its chequered history, Malta's real interests were never placed to the fore. Unfortunately, even when the island became a sovereign state, there were people who, with government support, used its land resources for their interests. There were accusations of corruption, but proof of this was hard to come by. It was only used as a political ploy to answer the political needs of the moment.

After a change in government, temporary land schemes were introduced in 1988, trying to make sense out of the prevalent nonsense that used to be practised in land management. Some people were inclined to conclude that these measures created new injustices, ignoring the fact that land management was unjust to the extreme and damaged the environment. Yet there have been calls to Government to remedy the situation for those who unwisely had bought property on the basis of the pre-1988 norms.

Government has laudably answered their calls. It has now introduced new boundaries to address those injustices. Though Malta has a structure plan, it is still without a comprehensive development land plan that cannot be tampered with for any reason unless through an act of God and to ensure environmental needs for future generations. It should not be presumed that a comprehensive land plan would not create some new injustices. But, at least, there is a long-term plan that cannot be changed quite easily and will help the people to make their own decisions before investing in land.

One would expect the Opposition to evaluate whether Malta's land scarcity problem has been properly and adequately addressed, and whether these injustices have been rectified. Instead of providing alternative solutions, as it should have done, and promoted a comprehensive land development plan to be agreed by all parties, it claimed that Government had ulterior motives when introducing new development boundaries. This reaction is typical of the reasons why Malta is falling behind other nations, particularly other EU member states. Whatever one party proposes, the other opposes, and the people get more disillusioned with politics.

Considering that Malta is one of the countries with the highest proportion of built-up areas in the world; and taking the substantial number of vacant premises into account, one should ask whether further development areas should be created without first addressing the land problems it has to face through a comprehensive land plan that should be agreed by both sides in Parliament. If this is not feasible, then the people should be directly consulted because it will seriously affect the well-being of future generations.

Building contractors and land speculators always find a way to amass wealth for themselves while young married couples are struggling to cope with their expenses. The following table gives the number of dwelling units that have been granted development permission between 1994 and 2004. This table relates to the number of units built. Apartments in blocks of flats are indicated as individual units.

It is clear that 1999 was not too good for the building and construction industry in respect of apartments and maisonettes and 2002 was the leanest year for terraced houses. But the table provides more interesting detail than just the lean years for the three types of dwelling units.

The most clear-cut observation is that the building of apartments, though mostly declining between 1995 and 2000, has been substantially increasing. In 2001 it nearly doubled, in 2003 it more than trebled and, in the following year, it nearly quadrupled the 1999 number of apartments built.

The table shows another important detail. While years ago, terraced houses were most in demand, the choice fell on maisonettes because they were cheaper. More recently, the demand for apartments has risen because they are the cheapest type of dwelling units on the market.

This result should clearly indicate that prices asked for dwelling units have risen astronomically and most people, particularly young couples, can ill afford to buy maisonettes, still less terraced houses. Admittedly, they can go to the banks and take house loans; but now they are also concerned about the interest rates they have to pay on ever higher amounts.

The pertinent question to ponder is whether the new development boundaries will affect prices for building these dwelling units. If one were to consider past trends, one would conclude that prices are not likely to decline too much because there are many important factors still in play. Building speculators and building contractors are prepared to wait to cash in their huge profits. They prefer to pay interests on loans until they finally dispose of the property they had built at a higher profit. In addition, estate agents, being paid on a commission basis, prefer higher prices for dwelling units. As a result, the price of property does not decline.

Given that Malta has one of the highest population densities in the world, it cannot afford to ignore the management, in a professional way, of its scarce land resources. It can no longer approach the problem in a piecemeal fashion. Management of land resources has to be exploited to the full if Malta really wants to safeguard its environment. It is about time we consider to what extent we can let our building area develop.

Malta can only solve its land resources problems if a wider vista is entertained. If we were to take an outward-looking perspective we would see how other countries are tackling land problems. One-off solutions are not the answer. They create more problems and injustices. Only a comprehensive land plan will help to ease the problem. If this is coupled with land reclamation, while seriously considering the environment impact, the situation would be considerably improved.

Dr Borda is an economist specialising in the economic development of small states.