More measures needed to protect property sector during ‘tougher’ COVID-19 second wave - MDA boss

The Malta Developers Association will be putting forward new proposals to help keep the construction and property industry afloat during the second wave of the COVID-19 pandemic, BusinessToday has learned.

MDA president Sandro Chetcuti told this newspaper that the association will be proposing a number of measures to government in the coming weeks.

“We will definitely be proposing that government extend the temporary scheme introduced in June on our recommendation, which reduced duties and capital gains tax on property sales,” he said.

Property sales flourished in July 2020, making the month one of the best since at least 2017, and according to preliminary data, more than 1,600 promises of sale were registered in July alone, with a total value exceeding €330 million.

This make July 2020 the best month since 2017.

Chetcuti said the government’s decision to adopt proposals the MDA made in June to counter the COVID-19 slowdown had convinced investors and buyers alike to return to the table and conclude promises of sale that were probably put off and extended in March and April.

“As the pandemic broke, some investors suddenly took a dtep back and were weary about committing capital in that uncertain environment,” Chetcuti said.

But the new measures tipped the balance and investors, both contractors and individual buyers, were attracted by the savings that became possible.

“If it weren’t for the measures we proposed, the industry would have floundered,” Chetcuti said.

The measures in fact saw the buyer benefit from the 5% duty and 1.5% capital gains tax. On a property valued at a mere €200,000, for example, that meant saving €7,000.

And some buyers also benefited from even further savings if the property being purchased was not the seller’s main residence. In those cases, sales tax for the seller was reduced from 8% to 5%, which on €200,000 meant a saving of €6,000.

“Many sellers passed these savings on the buyer, in a bid to sell their property fast, so some buyers ended up saving €13,000 on a property valued at €200,000,” Chetcuti said.

The MDA boss said that, despite these favourable figures for July, not the entire industry was doing so well, with the rental property market taking a big hit.

In fact, COVID-19 seems to have further dampened owners’ interest in the rental market, which had already taken a beating with the new rental regulations introduced earlier.

“Those regulations created a bureaucratic nightmare for property owners and many have simply lost interest in the rental market,” Chetcuti said. “This was made even worse with COVID-19, which resulted in a much smaller demand for property rentals, leading to a steep drop in rents.”

And that drop in rent prices has pushed even more investors away from the market which, driven by supply and demand, could not maintain the pre-COVID price levels.

So proprty owners were suddenly faced with a much more negative return-on-investment scenario than they were used to.

Chetcuti also hightlighted the need to bolster and strengthen all industries if the economy was to survive what was turning out to be a much worse second wave of the pandemic.

“As an association we cannot but highlight the importance of creating a stimulus for all economic sectors based on initiatives with very low-risk health repercussions,” he said.

“The MDA is very worried about the way the second wave(of COVID-19) is being handled and calls for better-coordinated efforts by government and increased efforts by everyone to make sure that the country emerges stronger from this the challenge.”