Measures only honest, brave politicians will take to bring down property prices

One reads The Sunday Times editorial (January 7) a number of times to try to get at the logic - removed with the word "otherwise" - which builds up to its final paragraph, and one simply does not find it!

The editor's conclusion is: "Otherwise, the free market, entrepreneurship and the work ethic of the Maltese will ensure that their (my italics) housing needs will always be within reach".

If by "their" is meant the general mass of Maltese, then that is already the wrong approach.

The Church, and others who feel for both the social and economic fabric of this country, wouldn't be worrying so much if such increasingly vast swathes of this mass - "the Maltese" - who are suffering in some way or other from these dishonest prices being daily advertised and demanded were really in a situation of having their housing needs satisfied in the Christian, dignified manner that they deserve.

If this ideal were really in place, and functioning, then we wouldn't have such ever increasing pressure on those hardworking people at Ms Marisa Leyson's Housing Authority for social housing, or we wouldn't be having the Church voicing its concern, or, even, we wouldn't have so many court cases (separations related too) having as their genus the high prices of property or related failed bank loan commitments.

In the reference to the "free market", even first-year economics students know that such idealistic markets really exist and function only when critical mass is such as to permit immediate clearance.

When - especially in a small-sized (27 km by 14.5 km!) environment - both on the supply side and on the demand side such endless critical mass does not exist (the factual case of Malta!) then market imbalances (including that cancer factor of inflation) will result.

So, please let's stop repeating and plugging this approach (so much the favourite of contractors, speculators, estate agents, money or politically inspired architects, and certain people in the media who gain so much from the advertising) and accept that - especially in a small market - no, the free market, does not ensure that - even with the most educated of people - government intervention to correct the so-called free market's inefficiencies is not absolutely needed. Government must intervene in the property market: period!

Careful too with that reference to "the work ethic". There are yes many hard workers in this country, but that does not necessarily amount to "ethically" correct workers.

The present housing situation has indeed driven so many families into situations where both parents absolutely have to work to keep up with their house loan commitments, and in so doing bringing on situations where what the editor says in the penultimate paragraph of the editorial - from the Church's Compendium of Social Doctrine - i.e. "dignity, unity and equality of all people", this simply goes up in smoke.

One could go on forever making such points. Thenceforth others will simply retort "so what do you propose"?

The first principle has of course already been hinted at. Let all politicians make it clear to everyone that: "No, the free market principle will not be allowed to unbridledly operate in the property market in Malta, and this simply because the country is too small.

Thereafter, decisive measures are needed that will start hitting hard at some people, and this is because, to drastically cut into the "get-rich-quick" and comic "endless sustainability" syndromes, the current situation requires even what are sometimes called kamikaze politicians to exist, and I'm still waiting to see the first of these in Malta!

So, for example (and I can already hear the screeching!), designate whole, very large, areas in Malta as simply "No development whatsoever" (NDW) areas (say the whole of Sliema!), i.e. accept to have a mini-riot or lose an MP or two at the coming election.

But this will immediately have the impacts of a) giving a clear indicatory signal to the rest of the country on Government's decisiveness and intentions of redimensioning that industry, which now - various recent economic studies have clearly shown - is not at all that large of an economic contributor as most of the previous blah-blahers about it kept repeating to all and sundry.

Simultaneously, or alternatively, introduce a system where no property of whatever nature can be advertised for sale in Malta without the owner first having to register it in a government register whereunder he will:

a) have to pay a Property for Sale Registration Fee of (say Lm20 per annum for a start);

b) be given a Marketable Property Registration Number which will have to be quoted in every advertisement, as well as in all notarial sale deeds;

c) have to declare what is the asking price at which the property is being placed on the For Sale Register; and

d) such price will only remain valid for registration for a maximum of two years, whereafter acceptance for For Sale Registration Renewal will only be allowed if said price is reduced by 20% after the first two years, and by further reductions of 20% each time after every two years for renewal thereof.

Notaries will have to be made responsible to ensure that they do not carry out konvenji or promise of sale contracts before ensuring that the valid, unexpired, Property for Sale Registration Certificate is presented to them, and duly recording its number on the deeds.

Yes, as I said, I can hear the screeching! This is possibly the only way that the country can attack the ever self-perpetuating inflation-stimulating rising sting of property prices. And my suspicion is that some of the wiser politicians are already seeing the benefits to a) government finances from the Registration Tax and its renewals, and b) to government's tax intake from data which, via CIR/TCU, helps ensure fiscal compliance. Over a certain time lag this measure may also have the spillover benefit of encouraging the rental market.

If some of the "screechers" want more to screech about I can suggest other considerations! E.g., review completely the present details of the Acquisition of Immovable Property by Non-Residents Act. Even within the constraints that EU membership has implied on this front, ways and means must be found to ensure that the buying of property in Malta by non-Maltese citizens is made harder and not easier.

Despite what some estate agents will keep saying, there is a clear crowding-out process going on in this small land area of ours that only brave and drastic measures that hit hard the lobbiers' pockets will start to reverse.

There are other "shockers" that one could suggest... but I'll store those up for later. But meanwhile a couple of final economic points. Doesn't it occur to all those who keep using the "property is a fine form of investment" mantra, that by continuing to so insist they are implicitly a) encouraging savers - in the particular case of Malta - to chose that inflation-boosting form of investment instead of investing in other economically necessary wealth-producing investment such as export industry, services, or offshore operations (why are our contractors not participating in big projects overseas?); and b) ever increasing our inflation through higher prices for everything and higher wage demands effecting our export industry's prices?

Roll on the screechers!

Editor's note: Last Sunday's editorial was a comment on the paper issued two days earlier on housing and related matters by the Diocesan Commission for Justice and Peace. Dr Consiglio is free to disagree with the position taken but in no way would we accept that this was an editorial that attempted to mislead readers, support any business interests or attack the local property market.

He is also free to express his economic views, but this may not be in consonance with the reality of what is happening at the moment. Even on an island of our size, given the population density, the free market can work, but some sacrifices have to be made. Any interference in the market would lead to a collapse in confidence and a flight of capital.