Tax evasion on rental income before 2014 kept official rent prices “artificially low”, which explains the steep rise recorded last year, according to developer Sandro Chetcuti.
The president of the Malta Developers’ Association acknowledged that rents have been rising as a result of higher demand from foreign workers but insisted increases were nowhere near what official figures showed.
“When the 15 per cent final withholding tax was introduced in 2015, many landlords started declaring rental income, which explains the higher figures for that year,” Mr Chetcuti said.
Before 2015, rental income was taxed at 35 per cent and landlords either did not declare the income or under declared.
“Abuse was rampant and it was not uncommon to have the official contract showing a low monthly rental fee and the unofficial contract with the higher rent,” Mr Chetcuti said.
This explains the lower official prices recorded by the National Statistics Office, he added.
It was not uncommon to have the official contract showing a low monthly rental fee and the unofficial contract with the higher rent
The NSO figures given to The Sunday Times of Malta showed how a single bedroom apartment was renting out for an average of €605 per month last year, an increase of 38 per cent on 2012 prices.
Rent prices for a two bedroom flat went up by an average of €178 per month, an increase of 29 per cent. In 2015, the average monthly rent for a two bedroom flat was €796.
The biggest leap in monthly rental prices for single and two bedroom flats was registered between 2014 and 2015.
In this particular year, the monthly rent for a single bedroom apartment jumped up by 23 per cent while that for a two bedroom apartment by 15 per cent after moderate increases in the previous two years.
Poverty campaigners have insisted that higher rents are placing a substantial financial burden on low income families and pensioners living in rented property.
Although apartments sought by many foreigners may be in the middle category, this has had a knock-on effect on rental accommodation across the board. Charles Miceli from the campaign group Alleanza Kontra l-Faqar told The Sunday Times of Malta that some form of legal control was necessary to cap rent increases.
However, Mr Chetcuti insisted that the market should be allowed a free hand and the government should adopt measures targeted towards low income earners instead.
The MDA is calling for bigger fiscal incentives to landlords who accept rental agreements of seven years or longer with a cap on rent increases.
“In this way low income earners can be assured peace of mind for a longer period while rent increases would be fixed,” Mr Chetcuti said, adding this would create a reasonable supply for low income earners without disrupting the market.
kurt.sansone@timesofmalta.com