The Prime Minister recently expressed satisfaction that 80 per cent of the population has become richer thanks to the increase in property prices. It sounded like we should be thankful for this unlimited property inflation period this country has gone into.
If indeed 80 per cent of families are ‘richer’, this is thanks to policies of previous governments from both sides of the House who pushed strategies focused on home ownership, making normal families owners of their own home at affordable prices and which today have become unaffordable.
Let us also appreciate that if 80 per cent have notionally become richer the remaining 20 per cent have become poorer, some even homeless.
Also, 80 per cent of the notionally richer 80 per cent (taking the Pareto principle) may own more expensive homes but their wealth has not really increased, as selling your expensive home to buy an alternative home that is equally expensive effectively leaves one in a neutral situation, not richer.
Not included in this statistic are our immediate future families and so-called first-time buyers looking for a reasonable home, who also are worse off as they cannot afford a reasonable home and make ends meet, as both buying and renting a property has become unaffordable.
The stories that portray the difficulties young professional couples are facing in acquiring a home, and reported in The Sunday Times of Malta of September 23 highlight the seriousness of the situation. The young professionals interviewed concluded that it is becoming more affordable to move abroad (and completely avoid this over-crowded and over-congested island) than buy an expensive low-quality property in Malta.
These professionals’ annual income as a couple was claimed to be around €55,000, clearly not on the lower side of the average income, and yet they cannot find a decent apartment. If they cannot make ends meet, what about those first-time buyers that average €25,000 to €35,000 a year? These people are trapped in poverty as going abroad is not really an option.
It [the market] is not fine for low-income earners, first-time buyers and those becoming poorer
The unrestricted rise in housing prices is creating serious economic risks for our country. We are outpricing ourselves and our economy is over-heating. However, there is another risk called a ‘brain drain’. As cheap labour continues to relentlessly fill vacancies, today even in the professional sphere such as accounting and IT, the country’s youths who we have educated with our taxes at University, Mcast or ITS, are considering leaving the island.
With their qualifications they can get better jobs in other EU countries where they will be able to buy or rent reasonable homes in places that offer a better quality of life.
The market is not fine and there are other factors beyond the mere buying and selling or renting and the commissions and profits that estate agents and developers make. It’s not fine for low-income earners, first-time buyers and those becoming poorer.
Considering the manner in which prices are rising the only hope for average-income earners is that this bubble will burst, unless the government seriously provides not only social accommodation, but equally important affordable accommodation for first-time buyers and other average-income families seeking a more adequate home.
Frankly, the Malta Developers Association’s Public Private Partnership proposals are no solution. Why should the government give free land to the private sector to provide housing units at €400 a month when building such units through the Housing Authority the contractor can get his fair share of compensation of around €55,000 for a three-bedroom unit that the family can repay through a home loan costing merely €250 a month for 20 to 25 years? Why should the MDA be given an extra €150 a month for every unit built rather than passing that benefit to families?
The strategy to address the housing challenge is not rent control, or limiting who buys and sells what and to whom, as the MDA proposed when alluding to some New Zealand model. The real solution can be found by understanding what made the so-called 80 per cent richer, namely the State-run home ownership scheme.
I urge the government to restart the building of adequate housing units that are affordable for average-income families and first-time buyers and build the units needed for social housing. Only such a policy will tame market prices, as it is market-based. Refraining from building housing units and assisting first-time buyers to buy from the private sector when there was an oversupply of property and reasonable prices made sense, but this is not the reality today and so government policies must change accordingly.
Secondly, the government needs to address the income disparity that property inflation and the import of cheap labour has caused. Malta’s economy cannot be deemed successful if it remains reliant on cheap labour. We rarely see Maltese waiters because the Maltese cannot afford to sustain their family on such a low income and therefore they prefer knocking on the minister’s door for a job.
In the meantime, hotels and restaurants boast ever-increasing profits (good luck to them) while paying peanuts in wages because the government keeps allowing them to fill their staff shortages with foreign workers willing to work for peanuts for a few months.
When Leader of the Opposition, Joseph Muscat had favoured a living wage. We are in an economic situation that merits a serious but short discussion. If developers are running this country and making millions, they should at least be obliged to pay more fair compensation to their workers and also contribute more to the national coffers to attain social justice.
These are the decisions that low-average-income families, first-time buyers and the poor are expecting from this government, and not a White Paper that will propose restrictions on selling and buying merely to continue benefitting the big developers who seem to want everyone to buy only from them after ruining people’s lives with their mega towers.
Tonio Fenech is a member of Catholic Voices Malta and a former finance minister.
Catholic Voices Malta is a network of Catholics that is willing to engage in a dialogue with the Maltese society through debates, programmes, seminars, printed and electronic media.