Rural leases: property market must be regulated

Recent data from the National Statistics Office has revealed that property prices have grown by 6.7% since last year.

The provisional index at 2022 stands at 222.33 – meaning houses are twice what they cost back in 2004 – up from 208.37 in the year before.

Indeed, the rate of change between 2021-2022 was the largest growth spurt to date. The last time the rate of change increased by over 6% was in 2019, when the property index grew by 6.5% between 2018-2019.

The immovable property price index confirms what researchers have established before.

The local property market saw massive growth between 2015 and 2022. If a property was priced at €151,000 in 2015, it is now valued at €222,000.

COVID-19 was no match for the property market either. Prices continued to grow at rates of 5.5% and 4.6%, which were still higher than the change rates seen between 2011 and 2015.

While the rate of change slowed during the pandemic, it is now back on its previous trajectory of rising prices.

The unspoken-of effects of property prices rising once again have not been given their due analysis.

One has only to consider the mere ‘psychological’ effect it has on aspirations of people who seek to climb the property ladder.

In a climate where salaries cannot enjoy exponential growth, or must remain chained to the industrial consensus on price inflation and rising importation costs, such stagnation in the face of rising property prices represents a challenge for any government; and a policy opportunity for any opposition party.

Suffice it to say, that rising property prices and rents are ‘push factors’ for workers to seek higher wages elsewhere.

Obvious as the previous statement sounds, in an island of Malta where foreign-owned remote service companies can offer extremely competitive wages, staff retention in ‘local knowledge’ companies in Malta is hard to maintain with lower salaries.

Add in the mix the incredibly deregulated nature of Malta’s property market. The examples of this kind of invisible deregulation abound: there are no annual property rates to be paid (in other countries this is a percentage on nominal rental value), a cost variable that would otherwise cool down the asset appreciation on houses; when local plans allow a sudden, indiscriminate increase in storey heights (leading to more apartments and greater pressure on infrastructure) asset values of what was once just a two-storey home, suddenly quadruple – the only cost to this will be the capital gains tax payable on income from realised sale; when the PA’s magic wand turns rubble in an agricultural field, into a villa with pool, an easy €1 million is generated with the mere stroke of the bureaucratic pen; and the real estate market has not yet been disrupted by a public database of all real-time property sales, to allow full information on pricing.

What the government’s proposed reform for agricultural leases this week shows is that, faced with a food security crisis should private landowners evict crop farmers simply for their own profit, the State can and is duty bound to intervene into the free market.

For the free market is simply driven by profit – not the common good, no matter what any kind-hearted, corporate sycophant might suggest. And it is up to the democratically-elected State to regulate the free market, into serving the common good.

Just like the reserved, green agricultural zones it will be creating, so can the State intervene into the functioning of Malta’s property market to regulate the way rental and property prices are allowed to increment.

Even the EU itself, faced with the need to keep people warm in winter at a reasonable cost, is attempting to place a limit on the price of gas to force companies to renegotiate their private supply contracts and forbid real-time traders from bidding above the maximum price.

These governments recognise that there is a limit to what the free market can impose upon a society when the basic requirements of housing cannot be met, or are being priced out of reach for young workers.