TMID Editorial: House prices doubled, but salaries didn’t
That the price of property has risen drastically over the past years is a well-known fact, but a recent study has given a shocking picture of the real situation.
The study, produced by Grant Thorton and Dhalia and published earlier this week, showed that property prices have doubled since 2013.
Effectively, a property that had a price tag of €100,000 in 2013 now costs over €200,000.
And, while the rise in prices seems to have slowed down over the past few months, the fact is that property remains way too expensive and inaccessible for young couples, with most of them being able to afford only tiny apartments, if anything at all. This is hardly the ideal way of starting a new family.
The study showed that the biggest increase in property prices occurred between 2016 and 2019. This was famously a time when the Labour administration was changing planning policies and where planning permits were being dished out like pastizzi.
It was a time when many people turned contractors overnight because they saw in the construction industry an opportunity to become instantly rich. Yet this was not what actually happened. As we tend to do, we overdid it. We built too much, flooded the market and set hefty price tags on all these new apartments and penthouses.
Yet instead of having a situation where prices went down due to oversupply, property prices remained high and unaffordable.
Furthermore, the explosion in property prices was not reflected in salaries. In fact, the average annual basic salary has only increased by some €5,000 a year since 2013, from €15,000 to €20,000. Women also earn some €2,000 less than men, on average, which means that property affordability is even more difficult for single women.
Affordability is tackled in the report, which states that, in 2021, the median 2-young adult household could just afford a 115 square metre apartment.
In the case of a one-person household, the maximum affordable house price falls significantly short of prevailing market prices.
In simple terms this means that, many single people cannot borrow enough money to buy a property – the banks will not lend them what they need.
The study also highlights the fact people are nowadays paying much higher prices per square metre, which means that, even if they can afford to buy a house or apartment, couples are only able to afford smaller properties.
The first-time buyer scheme, which has been extended year after year, has helped couples, but it has done so in a limited way. While it is true that couples are saving up to €5,000 they would have had to pay in stamp duty before, this amount doesn’t do much when an average size apartment can cost upwards of €300,000.
And the problem lies not only in the property purchasing market but also in the rental market. It is a known fact that rental prices have shot up over recent years as Maltese landlords have taken advantage of the highly paid foreign national who work in the gaming sector. But this has had a very negative effect on those Maltese families, those single mothers and fathers who cannot afford to buy a second property and who have to resort to renting.
The report found that a housing unit that was rented at €500 in 2013 now costs some €710. In many cases, apartments are rented at upwards of €1,000 per month.
Rental prices have decreased slightly over recent months but remain exorbitantly high for low-earning Maltese families and individuals.
Recently it was reported that the price of some construction materials has increased by up to 30%, mainly as a result of the Russian invasion of Ukraine. This will most likely lead to another increase in property prices, as the consumer always gets the sharp end of the stick.
This, coupled with the increasing cost of living, will make it even harder for young people to buy their own property.
The solution does not lie with regulation of the property market – this is a free market, and the government cannot and should not intervene. But property developers and sellers must acknowledge that the way in which things are going is totally unsustainable.
They must realise that this greed, this desire to become millionaires over a short period of time is falling short of expectations, and it is hurting not only them but also all those people out there who are seeking to start a new life and a family.