Property price bubble

I fully concur with Anton Gambina (A Property Market Price Dilemma? December 16). Malta is no different from California, London or Australia - there is a house price bubble that will surely burst.

During the last decade we have seen huge amounts of speculative capital going into assets such as housing. Markets across the Anglo-Saxon world have all been experiencing asset price inflation making it simply impossible for this trend to continue. In the UK average houses are eight to 10 times average incomes. Speculative mortgage equity release is releasing capital from houses that does not really exist but for a decade has fuelled UK economic growth. Low interest rates and lax lending criteria have fuelled a credit boom that can only end in tears and the banks know it, but still they persist in keeping this bubble inflated, in Malta included.

Just recently the UK financial services authority warned banks to make provisions for worst case scenarios of up to a 40 per cent correction for UK house prices. High energy bills and stubbornly high inflation will soon lead to higher and higher global interest rates which will cause this global pyramid scheme to collapse as is already happening in the US, Australia and Ireland.

As for Malta, the property market is flooded with over-valued houses and house price inflation is rabid. The percentage of people that could possibly afford these over-valued properties must be diminishing rapidly and the fact that Malta must now compete with other knowledge-based economies for foreign direct investment will only drive down real wages making it almost impossible for young, hard working couples and families to be able to get on the property ladder.

That Malta is small and demographically large, and therefore property price will always go up, is nothing but a myth. Year on year higher and higher energy prices and increases in energy surcharges will cause more demand destruction and higher unemployment in the private sector coupled with lower tourism numbers as these effects take place globally and tourists stay home. This, coupled with large debt and possible negative house price equity will eventually see Malta's housing market tank and only then will house prices come down to a substainable level.

Why should the basic human right of shelter be so unaffordable for so many. Housing is a basic human right and should not be treated like any other asset.