Regulate high rental charges

THE high cost of living in Papua New Guinea has taken away much of the shine from the country’s image of paradise that is portrayed in glossy tourism brochures around the world.
In fact, the “land of the unexpected” has become the land of ridiculously high cost of goods and services.
First-time foreign visitors and tourists usually get a rude awakening on arrival while the regular traveller has become accustomed to a fact of life that our citizens endure each day as they try to make ends meet in cities like Port Moresby and Lae.
Indeed, the high cost of goods and services has transformed our paradise into an unattractive destination for foreign visitors, especially tourists, and almost a living hell for a great number of Papua New Guineans.
The soaring cost of housing and rental accommodation in this country is considered to be among the highest in the developing and developed world.
For example, low covenant housing and accommodation rentals in the less affluent residential suburbs of Port Moresby fetch up to K500 per week while rentals for executive class accommodation in the affluent suburbs fetch up to K5000 per week and more for the luxury units in condominiums that have been popping up like mushrooms in the capital city.
One of the causes of the skyrocketing rental prices in the past six years has been the high demand for accommodation brought on by the PNG LNG Project.
Whilst the ExxonMobil-led K41 billion liquefied natural gas project has been credited for the country’s economic and investment boom, the downside has been its inflationary effect on the soaring costs of goods and services such as housing and accommodation rentals, particularly in Port Moresby.
In 2013, the then Treasurer Don Polye revealed that the Government was considering a recommendation to regulate housing prices throughout the country.
Polye had asked the Treasury Department to examine a recommendation by the Independent Consumer and Competition Commission (ICCC) to regulate the country’s housing market.
He said the Government’s focus was to reduce high prices “to see a market that is less regulated and free, competitive, quality-oriented and more thriving”.
Polye, now the Opposition leader, would have brought smiles to the faces of many working class Papua New Guineans, especially existing and potential tenants, if he had followed through with the proposal to regulate the housing market.
However, he was removed as Treasurer over the controversial UBS K3 billion loan deal and since then nothing has been heard from the Government about the ICCC proposal.
In the absence of a regulated market, real estate companies and property owners continue to dictate the prices of housing and rental accommodation without taking into account the affordability issue.
They have been charging tenants and employers, who provide accommodation for their workers, exceedingly high rental rates even for substandard accommodation.
You only have to look in the daily newspapers to see the kind of rentals that are being charged in Port Moresby and Lae.
It’s utter ridiculous, to say the least!
The past six years has seen accommodation and property rental prices reach astronomical heights.
The notion that competition will drive the market and pricing will work in an ideal environment but not in this country.
Supply can never quite match the demand, not now and not for some time in the future.
The PNG housing market is controlled by a very few players. They can and may operate pretty much like the oil cartel where prices are dictated more by them rather than be driven by demand and supply as one would normally expect of a market economy.
A regulated market will ensure that commonsense prevails and that housing and accommodation rates are brought under control and more importantly, made more affordable for the working class citizens.
The onus is on the Government to revisit the ICCC proposal to ensure this happens, one way or another as it is in the best interests of both tenant and landlord.
It would also be in the public interest for the ICCC to reactivate its recommendation and push for the regulation of the housing market, which is long overdue in this country.
It’s time to regulate an industry that thinks the sky is the limit for rental rates.