Buy-to-let and housing

Buy-to-let and housing

Airbnb has changed from a home-letting option to a buy-to-let operation. Photo: Reuters

Airbnb has changed from a home-letting option to a buy-to-let operation. Photo: Reuters

An article on the UK paper The Guardian and a discussion on LinkedIn, having a similar thrust, caught my attention this week. As such, my contribution today relies on these two elements; however, I have applied the thinking expressed in them to Malta.

The LinkedIn discussion had as a title ‘Europeans are tired of tourists’. The writer stated that a surge in tourism is pushing European governments to consider the effects of what has been described as “overtourism” and how to curb it. According to the World Tourism Organisation, international trips rose by six per cent in the first half of this year.

This increase is, to a large extent, attributed to recent and not so recent innovations such as low-cost airlines, larger cruise ships, online bookings, social media, readily available reviews, as well as what is being referred to as “home-sharing”.

It is important to note that the increase that was registered in Malta for incoming tourists in the first half of this year was nearly three times the global average. So we are certainly benefitting greatly from the increase in international travel but the risk of “overtourism” may also be present.

Three weeks ago I had written about the tourism sector and its growth. I had stated that I believe we should take a hard and deep look at our tourism sector, maybe like we have never done before.

The article published in The Guardian was more to the point. It was about Barcelona and how Airbnb and the so-called sharing economy is emptying cities. The writer of the article wrote about how the situation Barcelona has found itself in shows the damage that Airbnb can do, and how young people are being squeezed out of the city. This claim links to the issue of home-sharing mentioned in the LinkedIn discussion.

The end result of this is that property has become unaffordable for young couples

When the idea of home-sharing had begun and Airbnb started to become a household name, it was meant to be a way to let people rent their homes to tourists, while they were away for a holiday themselves. It was all about creating this global community searching to experience a country or city they visit, and not just look at it superficially.

It was also the way some people could afford a holiday, by renting out their home and then hiring a home when they visit another country, thereby avoiding expensive hotels. The model also led to more economic efficiencies as assets are used to the full.

Within a relatively short period of time Airbnb has changed its nature dramatically. In several European cities, Airbnb changed into a very professional operation with landlords purchasing or developing properties with the objective of renting them out. It became a buy-to-let operation, and stopped being an exchange of homes for a brief period of holidays.

This has led to landlords realising that they can make more money out of short-term lets, and so have started to charge higher rents to local young people wishing to let on a long-term basis. Those that had properties for sale also realised that they could make more money by renting them out than by selling them. This made housing in these cities unaffordable, and the end result is that the local young people moved out of the cities.

We need to appreciate that in Malta we are experiencing something very similar. The buy-to-let or the build-to-let is a most common phenomenon in Malta as well. The very large number of foreign workers in our country, most of them renting property on a six-month or 12-month basis, coupled with the increase in the number of tourists looking to stay in such accommodation, has certainly pushed up the price of rents and the price of properties available for buying.

Just to get an indication of numbers, it is worth noting that the percentage increase in the number of tourists between 2017 and 2018 making use of an Airbnb style of arrangement increased by 30 per cent compared to the 12 per cent increase in the number of tourists staying at hotels and similar properties such as aparthotels and guest houses.

The end result of this is that property has become unaffordable for young couples. They know it and their parents know it. We must also keep in mind in this discussion that the average annual basic salary in Malta is €18,643, according the last Labour Force Survey.

The answer to this issue should not be to change the economic model. My guess is that the buy-to-let model is here to stay, as are the low-cost airline model and the internet booking engines model. However, we need to understand that it cannot be allowed to work against the interests of the average Maltese population.

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