The Building Industry Consultative Council (BICC) has made proposals to the government on ways to handle vacant properties whose sale is held up byinheritance disagreements.
At present, a property which has been inherited by a number of people has to be sold if those representing 75 per cent of the property value want to sell, irrespective of whether the rest agree or not. However, the BICC feels that this percentage is too high and is recommending, after consultation with various stakeholders, that this should be reduced to just over 50 per cent.
Heirs can also ask the courts to sell the property after 10 years and the BICC is suggesting that this period should be reduced to three years.
BICC chairman Charles Buhagiar said vacant properties represented idle investment and that the government should use whatever ‘carrots’ it had to encourage their use. He was against the idea of using taxation, however, saying that this was not as effective as creating the right environment to encourage owners to put the properties on the sale or rental market.
“The government will get as much revenue from stamp duty, tax on rental income, and so on, as it would from taxing the empty property. So why not encourage rather than penalise?” he asked.
The National Statistics Office had reported around 70,000 vacant properties in Malta some years ago, but of these only some 40,000 were vacant year round, and the number has since dropped because of rental demand.
The Federation of Estate Agents has whittled this down to a more realistic 20,000 by removing those properties that are rented out or not really viable.
Vacant properties represent idle investment
“The vacant properties fall into three main categories. For those that are not sellable because they were badly built or whose location makes them unlikely to sell, the only solution is often to demolish them and start again.
“Others are simply overpriced – and this is often due to the high expectations of the heirs and owners. The property price index that we are now working on will help to ease this by giving the sellers much more realistic guidelines,” he said.
“And there is then the category we referred to earlier: properties owned by multiple heirs who cannot agree between themselves.”
The BICC is also proposing that government should offer a lower capital gains tax on properties if they are sold within three years of their becoming vacant, as a ‘carrot’ to discourage owners from hanging on to them.
Mr Buhagiar also expressed his belief that growing demand for rental properties would entice more people to put their vacant properties on the market.
“And another pull factor is that the number of new properties being put on the market is much lower than the demand, so this will also gradually erode the vacant stock,” he said.
Mepa reported that permits were issued for 2,900 units in 2014, a far cry from the 4,500 five years ago.
“Another positive factor is that the economy is doing well, so it is more likely that owners will have spare funds to invest into a property to bring it up to scratch and put on the market. I believe that we should see the stock of vacant housing decline slowly but surely, especially if our proposals are taken on board during the Budget.”
Prime Minister Joseph Muscat said recently that the Budget might be a good opportunity to roll out consultation on what the government could do to solve the prevalence of vacant properties.
The Malta Developers’ Association has suggested a ‘carrot and stick’ approach, obliging owners to look after their property but in the meantime also offering incentives.
One of the issues, according to sources, would be to define properties whose status might make them eligible for refurbishment incentives, in order to prevent abuse.
Only 6,500 properties are considered to be ‘dilapidated’ or require serious repairs.