But what if the root of our problem isn't just a lack of houses or greedy developers? What if it's something far more systemic, quietly eroding our society and leaving our youth, particularly single individuals, stranded in a property market they simply can't navigate?
I've been thinking a lot about the idea of a "savings glut", the concept that the world has an excess of money being saved rather than invested productively. This notion, usually linked to global financial crises, got me wondering: Could Malta be experiencing its own version, directly impacting our young people's and single individuals' ability to afford a decent place to live?
Getting a foot on the property ladder in Malta today feels like a pipe dream for many. The stories are everywhere: couples putting off starting families due to housing costs, young professionals trapped in endless rental cycles, and single individuals feeling completely shut out. For those without significant financial backing from their parents, it's not just a challenge. This isn't just about rising prices; it's about a fundamental disconnect between what people earn and what they need to live.
The article I read recently highlighted how a global savings glut leads to money being parked in assets that don't generate more productivity. It pointed to countries where high savings rates don't translate into commensurate investment, with these savings finding their way into financial instruments or, critically, real estate. Could this be us? Could Malta suffer from its "savings glut", driving our property market into an ever-escalating spiral?
And here's a crucial point: in recent years, a significant amount of money fueling this property boom hasn't even originated from local savings alone. We've seen a substantial influx of foreign savings flowing into our shores and directly into our property market.
This capital, seeking a stable and lucrative place to reside, has pushed local property prices far beyond what the local economy could ever hope to absorb with its current wage structures and productivity levels. This foreign capital has inadvertently driven up the cost of living for everyone, especially for housing and those hoping to buy or invest.
When local or foreign money is funnelled into assets that don't generate more productivity, it creates an economy where wages struggle to keep pace with inflation. If businesses aren't investing in growth and innovation, they won't create the high-value jobs that drive salaries upward.
The Bank's Role
This brings me to another critical aspect: the role of banks. Banks follow a formula, and they assess your current income and debts and calculate the maximum loan you can afford. Do banks consider the natural cycles of life people go through? Do banks account for reduced income during parental leave, unforeseen expenses of raising children, or the devastating financial impact of a serious health issue?
My experience, and that of many I know, suggests that banks primarily follow their formulas, aiming to lend the most significant possible amount to applicants. There's little to no proactive education offered to borrowers about how life's inevitable changes - from welcoming a child to facing an illness or caring for elderly parents - can dramatically impact their ability to meet those seemingly affordable monthly repayments. The focus is on the "now" and loan maximisation, not a realistic, long-term financial roadmap.
Property Schemes
This property market reality includes government property schemes. These schemes simply inject more money into an already overheated small property market by subsidizing the property market and "inflate" the purchasing power without addressing the underlying issues of available property data, transparency, supply, demand, and unproductive capital.
Property sellers, aware of these grants, might then factor them into their asking prices, effectively denying the benefit for the buyer. It's a classic example of demand-side interventions without the corresponding supply-side changes. This could result into a short-term fix that can exacerbate the long-term problem of unaffordability.
Systemic Change
What's truly problematic is that this cycle always reinforces itself, unless the government intervenes especially where there are market failures. As property becomes more attractive for those with local and foreign surplus cash, it further pushes up prices and creates a growing divide.
The solution isn't straightforward, and it certainly won't be easy to solve. But we must start by acknowledging that the property market isn't just about simple supply and demand. It's about how our collective wealth, including significant foreign inflows, is being used - or instead, not being used - to foster a productive Maltese economy that benefits everyone. We must encourage investment in sectors that generate higher wages and genuine economic growth rather than simply allowing capital to inflate existing assets.
This might involve exploring innovative tax policies that incentivise productive investments, such as attracting more companies to research and development in industries like health, space, transport, and energy, rather than focusing on speculative industries that do not contribute to human welfare.
For single people and young individuals in Malta, the current situation is more than just an inconvenience. It is a barrier to building a stable future, starting a family, and making a full contribution to society. Unless we address the underlying dynamics of how our wealth is used, especially when augmented by foreign savings, and financial institutions become true partners in long-term financial well-being, we risk leaving an entire generation behind, forever chasing a dream of homeownership that remains tantalizingly out of reach. This isn't just an economic problem; it's a societal one, and it's time we faced it head-on.