The International Monetary Fund (IMF) has advised Malta to ensure that measures to make housing more affordable remain targeted on low-income families, and advised it to consider stepping up the provision of social housing.
In its Concluding Statement of the 2019 Article IV Mission, the IMF said that rapidly rising housing costs were increasingly affecting vulnerable households.
“The recent relaxation of eligibility requirements for rents subsidies is a step in the right direction, but the scheme should be periodically reviewed to ensure it remains targeted on low-income households. Further efforts should be envisaged to accelerate the provision of social housing.”
The IMF also said that Malta should “consider gradually narrowing the exemptions to the envisaged new borrower-based macroprudential measures and ensure that fiscal incentives do not amplify house price cycles.”
Macroprudential regulation is the approach to that aims to mitigate risk to the financial system as a whole.
“The planned introduction of housing-related macroprudential instruments is appropriate given the rising exposure of banks to real estate risks,” the IMF said.
“The new measures – which comprise loan-to-value (LTV), and debt-service-to-income (DSTI) limits, as well as amortization requirements – are expected to proactively address the build-up of vulnerabilities in the residential real estate market and improve the resilience of balance sheets to a reversal in housing market conditions.”
However, the IMF said that these measures could be refined in due course to improve their effectiveness, including by narrowing the exemptions from the LTV and DSTI limits for loans against secondary and buy-to-let properties.
“The tax treatment of rental income should also be aligned with that of other sources of income to avoid amplifying house price cycles.”