Editorial

Talk property and you will swiftly find yourself engaged in a discussion on sky-high prices.

Discuss high prices and you are immediately pointing to newspaper advertisements placed by estate agents that rarely offer any accommodation, be it an apartment or a maisonette, for less than Lm50,000. This is more than six times the average annual pre-tax income. The vast majority touch Lm100,000 and over, and the asking price for not a few is in the region of half a million Maltese liri.

Nor is letting necessarily an attractive proposition. Seven commercial premises on an estate agent's books were advertised last Sunday. The asking rent was Lm650 a month, Lm600 a month, Lm55 a day, Lm40 a day, Lm30 a day - outlays that must add to the prices at which goods in these premises are sold or services offered.

Scores of millions of Maltese liris' worth of property advertised in our newspapers reflect what ought to be a seller's market, but is it? It is nearer the truth by miles that there already is a glut of unsold apartments and this glut will increase. In any normal market, this glut would have forced prices down. It has done no such thing. Owners, developers, speculators are happy to sit tight.

They should beware.

The Diocesan Commission for Justice and Peace recently expressed its concern over the cost of property. The same fear, for macro-economic not social reasons, is being expressed in Britain and the US where prices have been soaring for years. Buyers argue that property ownership is a sound investment, which it normally is, but some experts have been predicting for some time that a bubble is in the making and will burst.

One way of bringing prices down is, of course, to refuse to buy at these prices. Another is to open up the rental market by liberalising rent laws beyond the reforms established in 1995. The government has yet to publish its White Paper on this subject and Alternattiva Demokratika's campaign to force a referendum on this issue, launched with much fanfare, has come to a grinding halt. This is highly regrettable. It suggests that the party has been unable to raise the 30,000 signatures needed, unless, that is, it has nearly arrived and wishes to keep the results up its sleeve for the time being.

What, then, is to be done? Some have argued that prices should be capped. We believe this to be a fundamentally flawed proposition. If property prices can be capped, for social reasons, what is to prevent any government capping the price of anything for social reasons and giving rise to a disastrous situation that we have already lived through during Mr Mintoff's regime?

A report published by the Building Industry Consultative Council (BICC) claims that the average compound cost of flats rose by 56.5 per cent since January 2004. The Commission does not seem to have challenged BICC on this figure. It should have done. Instead, it seems to have decided that costs were pushed up by middlemen involved in property deals. How did it come to this conclusion?

We believe that part of the answer to the problem of artificially high property prices lies with the Housing Authority. Its budget has been raised to Lm12.4 million, a sum that includes Lm2 million to finance a scheme that will help people with their first purchase from the private sector. A further considered liberalisation of the rent laws will allow some 20,000 buildings to come on to the market. That White Paper on rent reform should see the light of day. And homebuyers should resist the artificially high prices being demanded by buyers and estate agents.