The new rent law, introduced just two months ago, is causing a significant dip in the rental market, the Malta Developers Association said on Wednesday.

"Landowners are increasingly reluctant to rent out their properties under the new restrictive regime," it said in a statement. 

"The implementation of the new law is also having a negative effect on the buy-to-rent property segment, which had grown significantly over the past years, and which is now reporting a significant slowdown."

The Private Residential Leases Act was designed to better regulate how contracts are drawn up. It introduces a series of responsibilities on the landlord and tenant that are overseen by the Housing Authority. New measures include one-year minimum rental contracts, a requirement for contracts to be registered and standard notice periods.

The developers' association said that insecurity, different legal interpretations, restrictive rental conditions, bureaucracy and lack of freedom of contract were among the main reasons why the new law was 'not working' and harming the industry and the economy.

"The law is turning out to be neither in the interests of the landlords nor the tenants."

The MDA said that while it was fully in favour of a system where leased properties were registered, the government should immediately note the situation and tackle it before it is too late. 

Changes, it said, must include measures to rid landlords and tenants from restrictive rules and ensure total freedom of contract with much less bureaucracy.

The association said the government must also tackle rules on pre-1995 rent contracts, which have already been declared irregular through various court decisions and which are prohibiting landlords from the full enjoyment of their property.

"While tenants with low pre-1995 rent agreements must be protected and assisted, it is the duty of the government and not the private sector to provide such assistance," it said.