Mixed reaction to interest rate subsidy

Estate agents and developers' representatives yesterday welcomed the incentives for first-time buyers announced in the budget.

During his budget speech, the Prime Minister announced that the government would be subsidising one per cent of first-time buyers' mortgage interests whenever the central intervention rate exceeds 3.75 per cent.

The rate has in fact risen from 3.75 per cent in January to 4.25 per cent in May, increasing the pressure of monthly repayments particularly on the middle- and low-income earners.

A couple with a Lm40,000 mortgage, for instance, would have seen their monthly repayment rise by some Lm20 for a mortgage spread out over 35 years.

The measure announced last Monday alleviates that extra pressure unless interest rates are pushed higher than their level so far.

Sandro Chetcuti, from the Chamber for Small and Medium Enterprises - GRTU, thinks the measure will help first-time buyers. "I'm disappointed that the government was not bold enough with the incentives, but I believe that this measure will help people".

There is an abundant stock of property which falls in the subsidised category, both Mr Chetcuti and veteran estate agent Frank Salt agree.

"I checked the other week coincidentally and found some 1,500 properties under Lm50,000. They're all over the island but obviously you're not likely to find anything in Sliema," Mr Salt said.

Countering the arguments of both, Alternattiva Demokratika chairman Harry Vassallo said the measure appears to be good but in reality helps developers and estate agents rather than buyers because it helps push prices further up.

"We need a comprehensive reform that looks at the issues in the property market holistically and not cosmetic measures such as this."

He insisted that AD's proposal for a rent reform was intimately tied with property market. "We need a reform that will make the renting market more accessible to people, therefore offering a viable alternative to buying one's home and taking on a mortgage," he said.

Labour's spokesman for social solidarity, Marie Louise Coleiro Preca, welcomed the measure, stressing however that the government had taken the cue from Labour's proposals, which it had previously criticised.

She echoed Dr Vassallo in calling for a national plan which deals with housing, describing the government's approach as piecemeal. "Any change which alleviates the burden on people is welcome but the government has failed to come up with a strategy," she said when asked whether she was worried that such subsidies could push prices further up.

Asked about Labour's national policy, however, she said that such a policy would need to be developed on the basis of widespread national consultation and was something that could only really be done from government.