I must admit that even though Malta and Gozo have a very sound and healthy property market, there is a problem. That problem is the shortage of low or reasonably priced properties on the market in certain areas that are suitable for low-income Maltese people to purchase.

The present situation is this.

Maltese people with a lower income can rent or buy properties built by the government. There is only a limited amount of these government properties and a long waiting list. There are many more Maltese people who want to buy on the normal private commercial market.

Some builders build both small and large properties in areas that are on the outskirts because the land is cheaper and they can therefore sell the properties at much more reasonable prices. There are quite a few of these on the market. The only problem is that not everybody wants to live far away from where they are used to living.

The largest single item that puts up property prices is the cost of the land.  There is absolutely no doubt about this. Building costs have only risen slowly over the years.

Estate agency fees (60 per cent of the Maltese buyers do not use agents), have remained at the same percentage for the last 50 years. Legal fees are the same and government stamp duty has decreased.

Developers’ profits are limited by the prices they can get from the market, and these are reduced by overheads, architects’ fees, Planning Authority fees, agents’ fees if any, materials, interest and tax. The developer’s profits normally have to be spread over two or even three years. What is left? The price of land.

The owners of land are in the driving seat and control the property market and especially the prices of property. To use an example. Swieqi, was a two-storey area for terraced houses and maisonettes. A terraced house was selling, not so long ago, for €300,000 to €400,000.

The Planning Authority recently gave permits for five floors and what happens? The owners of the terraced houses make their calculations and note that if a developer builds five apartments and sells them for €350,000 each, the portion of the sale price allocated for the land value is approximately 40 per cent. So he knows that he can sell his terraced house for €140,000 x 5 = €700,000.

But some of the larger terraced houses in Swieqi are selling for more than that, which means that the price of the properties on that site will go up even higher.

If people are prepared to pay the higher prices for flats built on that site, then the property price ladder goes up and up. This is happening all over Malta. So what can be done about this situation? What can be done so that Maltese low-income buyers and first-time buyers can afford to purchase a property in an area at least nearby to where they want to live?

Owners of properties that want to form part of a special scheme, can be encouraged to sell their properties at lower prices to developers by the government reducing sales tax when the property is sold.

Builders/developers can be encouraged to charge lower prices even more by government removing or reducing stamp duty when such properties are purchased for this type of scheme, and also taxes on profits being reduced when the properties are sold to the end buyers.

Architects could charge lower fees on such developments, again with government intervention. If the properties are sold by agents then the sales fees on these developments can be reduced, by the government giving tax incentives on such transactions only. The Planning Authority could charge less fee for such developments. In other words, everybody doing something to help.

What can be done so that Maltese low-income buyers and first-time buyers can afford to purchase a property in an area at least nearby to where they want to live?

Now, we are assuming that purchasers all want the same type of property. This is absolutely not the case. The Planning Authority should give many more permits for smaller properties, one or two bedrooms, and even studio apartments. This would mean a lot more properties coming on the market at much more reasonable prices.

This does not mean that if a site gets permits for 24 one-bedroomed units instead of eight three-bedroom units, the owner should put the price of the land at a much higher level, otherwise we are back to square one.

Permits for this type of development would have all necessary conditions mentioned before attached to them, so that everybody concerned with the building, sale or purchase has to comply with them.

So we are talking about well-thought out schemes on certain types of developments only that are meant to aim at those Maltese, who need help in purchasing their homes. All other property developments and property sales and resales remain the same.

Now renting property is another problem altogether.

There are thousands of foreigners living and working in Malta. This is due to Malta being seen as a pretty good place to live and work. Most of these people rent properties. They are in competition with Maltese wanting to rent a home.

These foreigners are all accommodated.  The very well off rent villas and luxury apartments, which are normally out of range for the average Maltese.

Then there are the smaller but nice apartments in good residential areas that rent in the range of €1,500 to €2,000 a month. These are within the range of some Maltese.

Then, you have foreigners sharing these apartments, normally with the landlord’s permission, but sometimes without.  Three people in a three-bedroom apartment paying €500 each. In some extreme cases, six people live in three bedroomed apartments and sometimes even more.

I doubt very much that Maltese would share like this, but it is an option, especially for young people and students.

Sharing properties has been going on all over the world and is a very successful way of providing accommodation especially for young workers or students. With this competition for places to rent, and there are approximately 45,000 foreigners wanting to live and work and are needed to work in Malta, there is a problem for Maltese to find rental accommodation.

Where there’s a problem, there’s a solution.

It can be sorted out by special developments being built as rental investments, by developers and investors, accepting lower returns for a good steady income and return on their investments, guaranteed by the government.

A developer buys land and applies to the government for a rental scheme to Maltese families.

The government would guarantee a return of say five or six per cent to the developer/investor when the development is built, finished, and occupied.

These developments could be built privately all over Malta and Gozo, and can only be rented out to Maltese or people who have lived in Malta for over 15 years.

The following example is very rough but it gives an idea. An investor buys land for €600,000 to build three-bedroomed apartments. He applies for a rental scheme. The investor gets permits for more floors giving 10 instead of five units.  Cost of building 10 units €600,000, total €1,200,000. Rental of each unit €500 per month. Ten units €5,000 per month. Total income per annum: €60,000 or five per cent return.

All these special developments for sale or to rent could and should be built in existing built-up areas, and maybe, as an added incentive, permits for greater height would be given if say at least 60 per cent of the properties in the development were included in the schemes for Maltese buyers or renters.

Something along these lines could be negotiated with the authorities. It just takes good will, constructive discussions, and common sense.

This is a Times of Malta print opinion piece

Sign up to our free newsletters

Get the best updates straight to your inbox:
Please select at least one mailing list.

You can unsubscribe at any time by clicking the link in the footer of our emails. We use Mailchimp as our marketing platform. By subscribing, you acknowledge that your information will be transferred to Mailchimp for processing.