Navigating the waters of the residential property market is not always plain sailing, especially when you’re doing it alone. It’s no secret that prices in the local market have outpaced the growth of wages in this decade of rapid economic growth, and it is undeniable that the phenomenon of hyper valuation has left many aspiring homeowners by the wayside.
Contrary to the perception of some groups, the Government has not ignored the plight of those individuals who have not been able to keep up with the rise of the selling price of an average dwelling house.
In fact, since 2017 the State has designed and implemented a wide array of schemes and policy initiatives to help interested persons access the market despite numerous impediments. The Equity Sharing Scheme is a fine example of how the Government can provide a helping hand to cohorts stuck in the limbo of unaffordability through collaboration with strategic partners and social innovation.
The Equity Sharing Scheme is a fine example of how the Government can provide a helping hand to cohorts stuck in the limbo of unaffordability.
In 2019, Parliamentary Secretary for Social Accommodation Roderick Galdes announced a first-of-its-kind product in tandem with APS Bank, which allowed applicants over the age of 40 to finance the acquisition of their property with the State acting as a silent partner covering up to half of the property value. This amount would then be repaid without interest within 20 years by the applicant, or alternatively their heirs.
This effectively doubled the spending power of these low-to-middle income buyers who had often found themselves looking for a decent place to live after the breakdown of their marriage. This scheme was hailed as a success by the hundreds of beneficiaries who went on to secure themselves adequate accommodation by virtue of this joint venture with the Government.
Two years in politics, and especially in the housing sector, is a very long time. The Maltese society, like any other society, is not static and develops organically at a frantic and often unpredictable pace. The situation was evolving and the Government responded to the new trends which were emerging locally. The profile of the prospective buyer in Malta and Gozo has now changed considerably with single persons over the age of thirty becoming the most prevalent cohort seeking home loan financing from commercial banks.
This new dynamic makes it difficult for individuals and, or couples earning, in aggregate, less than 30,000 per annum due to the shorther repayment terms available to these persons.
This has led to a timely and decisive response by Government to prevent these persons from sliding down the property ladder even further. The decision to extend the eligibility of the Equity Sharing Scheme to persons over the age of 30 is a game-changer in many aspects.
It is a move which: (i) is sensitive to the changing dynamics of the population; (ii) unlocks the potential of persons aged from 30 to 39 who needed nothing more than a partner to make their dreams come true; and (iii) continues to stimulate demand for affordable housing units which would otherwise be impossible to obtain for these groups.
How will it work?
With the help of APS Bank, the Government will allow people aged 30 to 34 who earn not more than €25,000 a year, and people aged 35 to 39 earning not more than €30,000 to access home loans covering properties with a value of up to €200,000.
The prospective applicants are still expected to cover the 10% down payment and shall be subject to routine means and asset testing to ensure that this scheme is helping those who really deserve the State’s assistance.
Think of the Government’s role here as a sort of angel investor: it’s not a handout, it’s not charity, it’s not a free-for-all. It’s a clear and direct investment in the potential of members of a generation who have had to faced the adversity of not one but two global recessions in their young lives.
The seas may be rough out there, but no one will be sailing alone any longer.