Where in the developed world can anyone hope to become the fortunate tenant of a property leased at Lm10 or €24 per year? Only in Malta. Whether the property in question happens to be a crumbling hovel, a palatial home or a strategically placed business premises is just a matter of luck, good or better luck for the tenant and always bad luck for the landlord or landlords.
Just as bizarrely, this scenario has held sway for the past 60 years in a country where the price of property has climbed steeply and consistently, taking an almost vertical trend in the past few years. Out of the total of 192,314 dwelling houses in the country, 17,000 lie under the controlled rent regime. An unknown number of other properties are under similar controlled rent conditions while being operated as commercial premises. These are traded for premiums in the hundreds of thousands of liri while the rent paid for them remains in the tens of liri and anchored to 1911 rates.
Controlled rent dwellings are bound to 1939 rates.
Just to add to the fun, the 2005 census documents the existence, two years ago, of 53,000 vacant dwellings, 60 per cent of which are in either a good state of repair or requiring minor repairs. There is every reason to expect that the total has been swollen by the number of development permits issued in the interim which has been consistently far above the net number of new households formed per year.
Meanwhile the price of property has skyrocketed to unprecedented heights far above the earning ability of the population. This is deceptively alleviated by the extension of loan periods from 15 to 25 years and recently to 40 years giving homemakers the illusion of being able to afford the inflated prices. The recent budget mechanisms, ostensibly in favour of young couples, add a few more mirrors to the intricate illusion. All aid given to first-time buyers ends up in the pockets of developers. Setting an upper limit of Lm50,000 to eligible properties only means that developers will offer smaller and smaller properties for Lm49,999: a gilded cage for young love birds.
It is Kafakesque that none of this seems absurd to anybody in politics other than Alternattiva Demokratika. Told that 28 per cent of properties countrywide stand vacant and awaiting occupants that will never arrive, the whole political class shrugs with awesome nonchalance. The pressure Alternattiva Demokratika has made and continues to make on government to address the situation through our attempt to abolish the rent laws and force Parliament to revisit the situation, has produced three years of waffle from the government. We were all promised a white paper on rent reform that should have seen the light of day two years ago. Where is it? Instead of enacting a rational reform, the government this year closed the last saving loophole in the 1979 rent laws.
Instead of showing a glimmer of concern, the government has based its electoral campaign on its latest construction scheme: 20 projects in Grand Harbour. Developers and architectural firms are vying for a place on the start line. Who could be against a revitalisation of the Grand Harbour? Nobody is. But it still seems to be a gargantuan carrot-dangling exercise just the same, another pre-election mega project to focus the mind of potential donors to the party coffers. Not to be outdone, the Malta Labour Party has proposed its rival Grand Harbour Scheme.
Does anybody have any idea what 28 per cent of all housing in Malta is worth? What it has cost in time, lifetimes, effort and materials to put together? The money value is anybody's guess since we can only know when, if ever, somebody actually buys the stuff. Nor will we ever know what we could have made by employing such capital more fruitfully. What we do know is that 80 per cent is not on the market. According to leading real estate agents 80 per cent of properties on their books are overvalued and consequently not realistically on offer. It is a matter of hoarding on an astronomic scale. This is what keeps the bubble going and growing.
Our attitude towards this situation is that of somebody falling off any one of our high-rise developments-to-be heard mumbling so far so good as he whizzes past the 20th floor. We are all hoping that the worst will never happen while doing absolutely nothing to prevent it.
The ultimate illusion is the widespread conviction, still expressed today, that the price of property in Malta will always stay above water because land is scarce in a small, overpopulated country. Has nobody read the 2005 Census on Dwellings published last month? How can anybody in his or her right mind express the thought that land is scarce in Malta when a tiny spit of land such as Sliema boasts of 2,667 vacant properties and will have around 2,000 more in a matter of months, thanks to high-rise development and dozens of microdevelopment projects? Sliema alone will shortly have nearly as many vacant properties as the whole of the Republic of Ireland, 6,000 of them.
The only thing keeping property prices stratospheric is belief, faith more profoundly held than any religious conviction. As long as buyers rush to buy today before prices go up tomorrow, it continues to make sense for owners to hold onto properties taking the asking price a notch or two upward every month or so. The day buyers realise that this madness cannot possibly go on forever in an utterly glutted market, they too will reserve their options. Perhaps a year or two living with granddad may be worth tens of thousands after all. If buyers and sellers hold their breath long enough, some sellers will realise that it is time to sell and fast. The first to do so will lose least. It could get very bloody. Yes, in Malta too.
The idea that the government refuses to say a word about all this is more than an epochal dereliction of duty. It indicates that the government is scared witless. It has absolutely no idea what to do. Of course deciding not to decide is what it has always done best: The ruins of the Royal Opera House in Valletta and the absence of divorce stand as mute witnesses of paralysis paying off in political terms.
The silence is a giant billboard declaring that all is well. It is a repeat of the outstanding declaration before the 2003 election that all was well with public finances: "Finanzi fis-sod". If that was the political confidence trick of the decade, the silent one on the price of property, in which the opposition wholeheartedly participates, is the trick of the century.
So what do the Greens propose? Quite probably exactly what the next government Red or Blue will have to do: To begin to deflate the bubble before it bursts, gently, carefully, responsibly. Neither of the parties in Parliament still cherishing 50 per cent plus aspirations in the next election will dare to tell anybody what they will certainly have to do in a few months' time. They will once more adopt a Green proposal and claim that it was theirs.
The next government will definitely have to find a way to nudge the market, to reward those who make reasonable offers and to penalise those who hoard property. This is what was proposed in Mepa's Housing Topic Paper 1995. Both the PN and the MLP know about it because they have both held office since. They can procrastinate no more.
Until the election, they will continue to act out the charade. They will continue to let people believe what they want to believe most: That nothing will change. To keep this up we are made to witness remarkable events such as the distribution of government-built housing units, 300 of them in the last pre-election handout. Nobody asks why the government should be building any subsidised housing in a country with 53,000 dwellings to spare. It is a boastful admission of gross incompetence in public administration. It is what has been done for decades and doing so sustains the impossible hope that the future will be a replica of the past.
If all our 53,136 plus vacant properties stood shoulder to shoulder we would have a ghost town the size of Birkirkara, Gzira, Hamrun, Msida, Pembroke, Pieta, Qormi, St Julians, San Gwann, Sta Venera, Sliema, Swieqi, and Ta Xbiex combined (total 55,196). Would we ignore them still?
Dr Vassallo is chairman of Alternattiva Demokratika The Green Party.
www.alternattiva.org.mt www.adgozo.com