MDA claim government housing project could 'open floodgates' to abuse

The Malta Development Association criticised the government’s plan to build and sell housing below market prices, arguing it risks destabilising the property market and is unfair on those who bought their dwelling at the market rate.

The MDA also said the government should not give out public land to developers “for free under the pretext of affordable housing.” They said the government should “abandon” the initiative.

The group, which represents developers, was referring to a government–church project to build 260 new housing units and sell them at 30 per cent below market price. It is led by Housing Minister Roderick Galdes.

The apartments will be available to people who cannot afford a property on the market but do not qualify for social housing.

However, the MDA said the initiative is short-sighted.

“Minister Galdes is thinking only in the very short term, without considering the consequences for the industry as a whole or the risks to the banking sector,” the MDA said.

They added that the initiative will destabilise property prices for families who paid full price for their property.

“This model also incentivises workers not to declare their full income — the exact opposite of what was just announced by the Ministry of Finance,” the MDA said.

They said the government should abandon the project “which is being launched without consultation and will open the floodgates to abuse — both from sellers and buyers.”

The MDA added that the government should strengthen existing programmes “that are functioning well.”

Tax exemptions and a grant of €10,000 over 10 years are among the schemes the government offers to help first-time buyers get on the property ladder.

However, some argue that such financial schemes lead to developers and sellers in general increasing their property prices, as they account for those incentives when setting prices.

Property prices have ballooned by 125 per cent since 2013. This means that a home that would have cost €150,000 in 2013 now sells for €337,500. 

The MDA added that the initiative will create an unfair advantage for those businesses chosen to develop the government land. They claimed the land is being given to those awarded the tender for free.

An MDA spokesperson said that even though the developer will eventually have to sell the property at 30 per cent below market value, they are still set to make an unfair profit.

“We usually calculate that land accounts for around 60 per cent of a property’s final value. But since they’re getting the land for free, the developer awarded the contract will earn roughly 30 per cent more profit than on a typical project.”