Households’ income from rent grew 132% in just four years

Rents have skyrocketed over three years, pushing poorer families to the brink, but the phenomenon has also benefitted many households, official figures show.

Households made €85.8 million last year by renting out property, according to data released last week by the National Statistics Office.

An analysis carried out by MaltaToday showed that in the three years between 2014 and 2017, households experienced an increase of 132% in income derived from rents.

In contrast, household income derived from employment rose by 17% during the same period and income from interest and dividends increased by a measly 3%.

The information comes from the poverty indicator released by the NSO last week, known as SILC (Statistics on Income and Living Conditions). The indicator includes a breakdown of household income in Malta, including that derived from rent.

Rental income made up just 1.5% of all household income in 2017 but even here it constituted a higher portion than it did three years earlier. In 2014, with rental income recorded at €36.9 million, this source of funds accounted for just 0.8% of all income for households.

The statistics do not give a breakdown on the number of households that are benefitting from the accelerating rental market but economist Philip von Borckdorff said the figures suggested the increase was also due to more people renting out their own property.

“Rents have increased, which contributes to the larger amount recorded by the NSO but there is also a phenomenon of more people renting out idle property they owned, such as summer homes, and others who have bought apartments to rent them out,” Brockdorff said.

He also noted that income from bank interest and dividends was less lucrative, which has prompted some to invest money in the property market.

“The rental yield is phenomenal when compared to other countries and in the current low interest rate environment, the options to invest have been narrowed down, which has prompted people to buy property to let,” he said.

A similar view was expressed by Malta Developers Association Secretary General, Michael Stivala.

Writing in the Times of Malta last week, Stivala insisted that homeowners were benefiting from the property boom.

“Often private homeowners opt to collaborate with a developer to demolish their home and build an apartment block to rent or sell, reinvesting the surplus value for the benefit of their offspring and becoming developers themselves,” he wrote.

And with the demand for foreign labour remaining strong, Brockdorff said it was unlikely the current “frenzy” to invest in property would subside.

But the economist did point to the irony that the very same growing foreign labour force that is contributing to higher rents because of increased demand, is also keeping wage-growth depressed.

Brockdorff was not surprised by the relatively slow growth in income from employment. “The growth in wages has been kept in check by the cheaper wages paid to foreigners,” he said.

Anti-poverty campaigners have been clamouring for government action to apply the brakes on the rental market because the increases were outpricing poor families.

But despite this emphasis by various organisations, including Caritas, the concern on rising rents does not appear to be widespread.

Surveys on concerns carried out by MaltaToday have not featured rising rents as a top concern.

This could possibly be explained by the fact that the vast majority of Maltese are homeowners and it would appear now, they are also profiting from a newly-discovered rental market.