A roof over everyone’s head

Property prices in Malta have risen by 843% over four decades, according to an index published by the Central Bank of Malta.

Rising housing prices, relatively stagnant wages, demographic pressures, and declining affordability in many countries, including in Malta and the rest of the EU, are jncreasingly challenging housing affordability all over the world.

Between 2005 and 2019, real house prices increased in 31 countries of the Organisation for Economic Co-operation and Development (OECD), and rent prices rose in all but two OECD countries.  Moreover, since the global financial crisis of 2018, house prices have risen faster than incomes in 21 of 33 OECD countries for which data are available.

Property prices in Malta have risen by 843% over four decades, according to an index (2015 = 100) published by the Central Bank of Malta.  Between 1980 and 2004, they rose by almost 368% and continued rising till 2007.  With the onset of the financial crisis, there was a slight dip for just two years, but then resumed an upward path until 2013 when they equalled their 2007 level.  Since 2013, they have risen a further 84.4%.  Comparing the last decade with the previous one, the increase has been twice-and-a-half.   

However, average salaries have not kept up with the rise in property prices.  While between 2000 and 2012, average salaries rose by 4.52% per annum compared to a 3.46% annual rise in property prices, in the decade after that average salaries rose by 3.43% per annum compared to a 6.31% annual rise in property prices.

These trends have made it harder for households to afford housing. Indeed, the percentage of the population with a housing cost overburden (housing costing more than 40% of disposable income) has grown from 1.7% to 2.9%. This is the reverse trend of what happened in the EU overall, though the EU percentage in 2022 was 8.7%.  Only Cyprus and Slovakia have a slightly lower number than Malta.  Within the overall percentage, the occurrence of a housing cost overburden is now lower among persons aged 65 years or over, where it has gone down from 11.4% in 2005 to 5.7% in 2022.

What is very worrying, however, is that the percentages of various other categories of persons have all gone up.  For example, those at risk of poverty with a cost overburden have almost doubled to 12.1%.  The percentage of young people with a cost overburden, be they in the category of 18-24 years or of 25-29 years, has risen five-and-a-half times to 15.6%.  The EU’s number, by comparison, is only 10%. 

When one talks of housing cost overburden, this is not something that applies to people who rent only since it could be the case that people who own their home and have a mortgage to pay may not be able to afford the mortgage, particularly in times of high or rising interest rates.  In Malta we have a very high percentage of home owners, the percentage having risen from 79.9% in 2008 to 82.6% in 2022, but in 2022 28% of such households still had outstanding mortgages to pay.  The non-home-owners were either ranking at market rates (7.5% of them) or had a reduced rate (9.9%).

Social and affordable housing

Social housing is an important dimension of social welfare policy and affordable housing provision, representing about 6% of the total housing stock in OECD and non-OECD EU countries.  For instance, according to a European Commission report also quoted by the Housing Authority, social rental housing in 2012 made up less than 10% of the total dwelling stock in most OECD and EU countries, but 24% in Austria, 28% in Denmark, and 32% in the Netherlands.  The percentage in Malta was 6%.

An extremely interesting analysis of social housing in Malta was conducted by Dr Vincent Marmarà and Dr Maria Brown in 2021.  The authors profiled social housing applicants in two categories, namely Affordable Housing (housing for a segment of the population whose income is higher than that of persons eligible for social housing but not high enough to enable them to purchase/lease their residence unaided), and  Social Housing (housing for the segment of the population in the lowest income strata, currently set at less than €10,000 per annum for single persons, and less than €12,000 per annum for married couples.  An additional €700 is allowed for each minor child.

It resulted that 29.7% of all applicants were in the age bracket 26-35 (population percentage: 18%); 24.4% were between 36 and 45 years; 14.7% were between 46 and 55 years; 11.3% between 18 and 25 years; 10.8% between 56 and 65 years; and 9.0% were 66 years or above.

The average total income of respondents was €755 per month, but that of respondents living on social benefits only was 30% less, at €530 per month.  Just over half (51%) of all applicants were living in a rented residence; 26.4% were sharing a place without paying a rent; 11.1% were sharing a rented place; 10.9% were in a “Tolleranza” residence; and 0.6% claimed that their home was theirs.

The quantitative analysis showed that, amongst those individuals who were paying rent, the average rent was around €252 per month. However, if those individuals who were paying the lowest rents (< €50) were excluded, then the average rent was around €321 per month.  When respondents were asked what they believe is the fair rent, they replied that it was €178 per month — a far cry indeed from the rents applicable at the time.

Challenges

The study contains many anecdotal quotes from respondents which shed light on their needs and perception of their situation.  For example, when respondents were asked what kind of problems they were encountering in applying for a home bank loan, 26.5% claimed that their main problem was the initial deposit, followed by 16.1% who claimed that paying the ‘monthly payments’ might be very challenging, 14.3% due to the ‘payments of the interest amount’, 11.5% claimed that it was impossible for them to take a loan since they were unemployed, 9.8% due to their age, 6.1% due to their low income, 3.4% due to their working conditions (not a fixed employment or not full time employed), and 2.7% since they were living on social benefits.

Do we still have a social housing problem?  Well, according to the previous chairman of the Housing Authority, quoted by The Malta Independent in September 2021, less than 1,800 people were on the social housing waiting list at that time. The number of people on the waiting list has been on a downward trend since 2017, when the number stood at 3,810 though the number in 2012 was 2,773.  The CEO attributed part of this decrease to the procurement of an additional stock of dwellings through the rehabilitation of dilapidated ones and an initiative to lease dwellings from the private sector so that they may be leased for social accommodation.

A month later, the Minister for Social Accommodation, Roderick Galdes, was quoted as saying that, by the end of 2022 some 942 families would have moved into social housing.   That would have left a further 940 on the waiting list two years ago.  Problem solved?  Probably not, since the demand for social housing depends on a large variety of reasons, one of which could be the impact of the recent inflation on the financial situation of the more vulnerable households in the country.

The Foundation for Affordable Accommodation: welcome news

In this context, there was the welcome news in January 2022 that the Government and the Church had set up a Foundation for Affordable Accommodation, aimed at providing social housing to those with a low to median income. The state and the Church will provide assets, including land and existing buildings, for residential projects with rents cheaper than those on the market. The income will be invested in the operations of the foundation, including property purchasing. The government  allocated €300,000 a year to the foundation for a 25-year period while the Archdiocese donated the convent of Saint Joan of Arc in Kirkop with a temporary lease for 25 years.

When he launched the Foundation, Prime Minister Robert Abela said that, “the guiding principle is for everyone to reach one’s aspirations and dreams … a comfortable home is a fundamental right.” Archbishop Charles J. Scicluna stressed that housing contributes towards the dignity of the human person and social justice. “Part of society is not able to keep up with the market, so this move is a contribution to a society built on social justice,” said the prelate.

Indeed.

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