Real estate market could implode, AD warns

The huge amount of vacant properties and the glut of new developments threatened to send the real estate market crashing, Alternattiva Demokratika warned.

In the light of this dire situation, AD called on the government to reverse its decision to extend the development zones and instead financially compensate those who would lose out if the extension of the development zones was dropped.

With the census for 2005 revealing that the country had 53,000 vacant properties and the Malta Environment and Planning Authority last year issuing a record number of permits for 9,000 units, the risk of a property crash was "enormous".

The Green party believed that if Mepa granted more permits to build complexes with thousands of apartments, for which there was no effective demand, the country faced a serious risk of a property implosion.

Speaking at a press conference, AD chairman Harry Vassallo questioned how the two large parties had ignored the shocking statistic of vacant property stock.

The party felt that neither the government nor the opposition had the policies to deal with this problem. Worse still, nobody had the courage to even admit there was a problem.

Dr Vassallo said that if the 10,000 holiday homes were deducted from the number of vacant properties, but then added all the units built since 2005, the realistic figure of purely vacant properties would be closer to the 50,000 mark.

"Over one fourth of this country's property is lying vacant. The capricious environmental destruction and health hazards resulting from this is immense and will affect future generations," he said.

The government's recurrent policy to favour the building industry had made the country too dependent on it and led to a lopsided economy where the other industries were Cinderellas in comparison.

AD believed nobody should be allowed to keep property in a derelict state to the detriment of residents who kept their properties well maintained - property rights came with responsibilities.

AD proposed that the government implement a system that actively encouraged more of these properties to come onto the market for rent or sale, while discouraging property hoarding.

All those who owned three or more properties should be made to register them and declare their value.

On an annual basis they would be subject to a charge amounting to 15 per cent of the rental value of the property, which the law already stated should be three per cent. This would be a kind of withholding tax.

A property worth Lm50,000 (€116,468.7) would be subject to an annual charge of Lm225 (€524.1).

However, if the property was then rented out, no income tax would be paid and the rent would effectively be tax free.

This would generate about Lm9 million a year (€20.96 million), a sum the government could use to assist those in need.

Dr Vassallo said it was disappointing that the government, with the support of a silent opposition, had allowed the building of so much property that now lay vacant and unused, especially when considering the critical lack of open spaces.

"What we have is a useless and hideous environmental scourge in order to please the building industry, that is financing the two large political parties," he said.

In the light of such a situation, it was pathetic to hear the government's budget proposal to assist first-time buyers, when there was clearly no shortage of supply.

"The most effective policy to assist first-time buyers is to have a system that puts more properties on the market, a measure that will allow property to be priced at a more affordable level," he said.