Editorial

There are few subjects guaranteed to stir emotions of many Maltese as the one on the future of the property market. The love affair of the Maltese with property ownership is only matched in intensity by the almost dogmatic belief of many that investing in property is practically risk-free, at least in the long term.

Thus, when someone challenges these acts of faith in our property markets, some are taken aback and react by claiming that the dynamics of the property market in Malta are indeed unique. But are they?

Not according to the chief executive of Banif Bank who has signalled that, if something is not done at a national level, we risk seeing the property bubble bursting. Apart from this sober warning, in the recently held property seminar we heard the usual list of platitudes. Some insist that the government needs to do more to help the property sector, while others stated and that good property will always sell well, while bad property prices will crash.

The reality which many choose to ignore is that the property market is affected by supply and demand. When supply outstrips demand, prices are bound to fall. This is what is happening in the Maltese property market at present.

Is this a bad thing? Not necessarily, especially if this phenomenon helps many to put their foot on the property ladder for the first time. When property becomes more affordable because prices come down, developers may forgo some of the profits they thought they would make, while others will become happy, if indebted, homeowners when before they could only dream of owning their home.

The quality of the houses we build is also a factor that is affecting the property market. Ultimately, everything sells because the price paid for anything reflects the perception that buyers have about the value of the thing they are about to buy. Some would never afford to become property owners unless there were properties at the lower end of the market available at prices that are affordable to the less affluent.

What is really worrying is the symbiosis that exists between the property market, the natural environment and the tourism industry. By continuing to increase the supply of residential properties in our small overbuilt island, we are inevitably damaging the natural environment. When we do this, we increasingly scare away potential visitors who many consider are the best hope for the revival or the property industry.

The property industry will always remain one of the main motors of the Maltese economy. However, what is more important is the understanding that our insatiable desire to build more houses is affecting the prospects of tourism.

Government intervention should not be in the form of assistance to property developers through fiscal concessions, marketing campaigns or joint ventures with the private sector, as suggested by some. It should rather be in the form of better development planning that is increasingly aimed at protecting the fragile natural environment.

We are risking killing the goose that lays the golden eggs. The metaphorical golden eggs of course are the enormous benefits that tourism generates. The goose is our potentially lovely natural environment.

The arguments in favour or against investing in the property market are not different from those of investing in any other market. Risk and reward are closely correlated in most investments. When bubbles burst they prove that those who take big risks can sometimes suffer great losses.