As demand for rental properties grows, so supply is increasing, which will eventually bring down rental prices, the chairman of Dhalia Chris Grech believes.

“Market forces are working and the supply is increasing to meet demand,” the founder of one of Malta’s oldest real estate agencies said.

“Obviously this will take time to catch up, and at the moment, there is a desperate shortage of properties with the higher prices at the top end dragging up the prices at the bottom.”

However, he is adamant that the government does not need to interfere by imposing price controls, and that apart from initiatives to increase supply – especially for social housing – a balance will be reached so long as the free market prevails.

READ: Low-income families are feeling the rental squeeze

“My instinct tells me that there is a snowball effect as the sales market is very much influenced by the rental market. Today there are thousands of small investors, both local and foreign, using their investment to purchase property for rental income, who borrow money and put all their life savings into properties for rental investment, and that too is helping the supply to grow.”

He said banks were actually promoting buy-to-rent which showed they were confident that people were investing wisely and getting a good return on their investment.

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“But you cannot control rental prices as, if you did, you would also control sale prices, as the income depends on the money you borrow and the income you make.”

Rising rental prices, spurred by an influx of foreign workers and a booming economy, have been in the sights of anti-poverty campaigners, who argue that the unbridled free market is causing new social problems.

In the last Budget, the government said it would issue a White Paper on the property rental market in order to address the problem. It proposed that all property rent agreements be registered, with the contacts specifying the lease term and amount due in rent through the whole term.

Announcing the measure, Finance Minister Edward Scicluna said the government wanted to better regulate the rental market and would be encouraging landlords to put up more properties for rent.

He made it clear, however, that the government would not return to the time of rent control.

The Malta Developers Association has warned that while some regulation of the rental sector is necessary, it does not believe that a return to rent control would help the economy “since this will stunt the growth of the rental market”.

‘Government should consider relocating Mrieħel tenants’

The chairman of Dhalia Chris Grech.

The government should consider paying the semi-industrial tenants in Mrieħel to move out, making space for the area to upgrade to a high-end business park, says Mr Grech.

He says Mrieħel will be the island’s flagship as an office destination, as it has so much in its favour – from its central location to the fact that it is not a residential area.

“We are talking about a proper commercial destination – a business park – which we do not have in Malta but which other countries have,” he said.

“Smart City has diluted its concept in this context and is now accepting residences. Malta is too small a country to have a specific business park but Mrieħel is the closest that we will get to it. Unfortunately it is semi-industrial, which kills it.”

There are a few high-end developments on the rim of the area, from the Farsons business park to the Gasan/Fenech development. However, the core of Mrieħel is still taken up by numerous light industries and warehouses.

Mr Grech said that many of these businesses had been there for decades and would be unlikely to move out: “I am not saying that it is not possible to co-exist but I think eventually someone will have to pay a price and move them out, giving them a good deal. And the only party that can do that would be the government itself.”

There are more than 250 operators in the area, who between them employ over 6,000 people. The need to manage an area the size of Valletta has long been felt. The Mrieħel Enterprise Zone Foundation was set up in March 2016 as a ‘joint venture’ between the government, represented by Projects Malta, and 18 operators from the private sector.

However, nearly all the land is privately owned (not to mention that it falls under no fewer than three local councils). Only the former Dowty site belongs to the government, currently being developed as a zone for food production.

But while Mr Grech – whose head office is in Mrieħel – welcomes the foundation’s initiatives to clean up the area and tackle its pot-holed roads, he is looking at it from a completely different point of view: the need for office space if Malta is to sustain its economic growth.

“Although there are a number of locations like Sliema, St Julian’s and Valletta which will always be popular for offices, we need to have a good supply of purpose-built upmarket office spaces, with a concierge and all the facilities that big international organisations need, offering thousands of square metres of open space, for example.

“Once people out there know that we have the product, then we can work to attract them and they will come. It is a chicken and egg situation. You cannot attract investors and have nothing to offer them when they get here. The economic climate is good so there is a strong appetite for Malta and I think we have the means to attract large organisations. But we must take action as otherwise we might lose opportunities,” he said.