No, Prime Minister, owning the only house we live in does not make us any richer – Ralph Cassar

In an interview on the Labour Party’s radio station one Sunday in September, reported faithfully and uncritically by the media, the Prime Minister solemnly and proudly declared that 80% of us Maltese are ‘automatically richer’ because we own a house or a flat, and the value of property is on the rise.

This is a very common but fallacious argument. Debunked again and again, but popular with some politicians, not least our dear politicians from PL and PN. They are so in love with the construction lobby that they spare no time in peddling these and other myths. The only people getting richer are property speculators, who build, own and trade hundreds upon hundreds of properties, from tiny flats to maisonettes, to so called ‘villas’ or towers for the multimillionaires. Some even get public land for peanuts – just ask the db Group.

The fact is you do not get rich by owning the one and only house or flat you live in. Yes, if you sell that house or flat, you would probably cash-in more than you spent, but first of all, you are probably paying a home loan, so a big chunk will go towards paying the bank.

What’s more, since prices are going up, the new flat, or if you can afford it, house, you’ll buy will probably be either of the same type, or more probably a downgrade. You’ll end up spending more money for less. As for the renting option, forget it. If you do not have the 10% deposit for your own flat – which 10% is getting higher and higher – you’re in deep shit.

I know someone making a 430-euros-a-month loan repayment on a small flat bought around 10 years ago. Similar tiny flats in the same area are being rented out for anything between 700 to 1000 euros a month. Crazy. In this sense, yes, the owner is ‘richer’ – safe from the fluctuations of the market and paying a stable ‘rent’ to the bank over a period of time. Such owners, owning only the place they live in, would be crazy to try to ‘enter the market’ and sell.

With prices going up thanks to Muscat’s laissez-faire and neoliberal attitude, not much different from that of the previous pro-speculator PN government, home loans are becoming more expensive to maintain. However, for normal median wage Maltese employees, renting is even more expensive.

Buying a flat or house is a major financial decision, giving people peace of mind. Culturally, emotionally and practically, the sense of owning the place you live in is important to most of us. But you are not investing in the financial sense of the term, unless you are a multi-property owning speculator with loads of capital.

Let’s for argument’s sake say that property prices increase at the rate of inflation (in fact figures show that the increase is much bigger). If nannu and nanna bought a house for 6,000 euros 50 years ago, that was a huge sum of money for them.

Let’s say it now appreciated to a value of 200,000 euros. If you inherit the house and already own your own place, all well and good, any profit on the sale is yours. However, nannu and nanna did not get richer. If you had to buy the house, you probably wouldn’t afford it. If you just move into nannu and nanna’s house, again you are not getting any richer. A house or flat has a more important primary purpose than the Prime Minister so simplistically put it.

The primary purpose is that of providing shelter and a sense of security. When you make an investment, one of the more important aspects is controlling when you can buy and sell, say stocks and shares, to maximise your returns. But if the property you own is your primary residence, you don’t have such control.

You cannot just sell. Selling a house is highly disruptive. You’ll still need somewhere else to live. Basically a house cannot be an investment if you never plan to sell it. Most of us, Prime Minister, are not speculators. What’s more, owning a house, is a financial commitment. Probably, as stated earlier, a safer commitment than renting but apart from monthly mortgage payments, homeowners insurance and utilities, you also have to maintain the property – paying for repairs and maintenance regularly. Some pay yearly ground rent, and a yearly contribution to the owners association to maintain the common areas of a block of flats.

So, Prime Minister, stop bending over backwards to please the construction lobby. Just stop. And by the way, the average wage may be going up, but when even those with relatively good salaries working in the gaming industry have to share tiny flats, then something is wrong. Let us not forget that living at the mercy of the market and having to move when the village or town you lived in becomes unaffordable also has a detrimental effect on community cohesion.

Stop giving away public land for peanuts for the building of isolated, gated communities. As for the 80% who are home owners, especially those paying a home loan and struggling to live decently, ignore the Prime Minister.

Don’t think of your house as an investment. Enjoy living in your house or flat and appreciate the peace of mind it brings in knowing that had you rented you’d probably be paying at least twice your mortgage a month. Laissez-faire capitalism sucks, ask anyone who rents.

Ralph Cassar
Published on the MaltaToday – 26 September 2018