Thunder struck the island. HSBC, at least momentarily, doubled the down payment required for a mortgage from 10% of the property value to 20%. That’s for a first home. For a second home, buyers now need to fork out 25% of the total property cost compared to 15%. HSBC also increased interest rates from 2.7% to 3.1%.
HSBC’s drastic changes strike at the heart of what the Malta Developers Association proudly calls the backbone of the economy – the construction industry. Malta’s property bubble was already looking shaky. 2022 saw a staggering 3,500 fewer promise of sale agreements compared to 2021. The greedy titans of that industry – Joseph Portelli, Michael Stivala, Charles Polidano ic-Caqnu, Bonnici Brothers – must have been quaking in their boots. Their magnificent empire was facing an almighty earthquake.
They must have been nagging at the Prime Minister. Soon enough Robert Abela was publicly denouncing HSBC.
“Buyers looking for a loan have other alternatives,” Abela declared at his press conference. He was announcing details of a 10,000 cash grant to first-time buyers, really intended to boost the profits of his developer friends. Abela was publicly chastising HSBC. And warning other banks not to follow suit, saying, “I appeal to other banks to refrain from doing what HSBC has done”.
For the prime minister to publicly pressure banks on how to run their business means only one thing – he’s desperate. He knows that doubling the down payment for a mortgage and raising interest rates will decimate demand. That will explode the property bubble. It would wreck Malta’s economy. And would dry up the rivers of profit that currently flow to Labour’s backers – the mega developers.
That would be an existential threat to Labour and its stranglehold on power – which is why Robert Abela wasted not a minute in mounting his assault on HSBC.
HSBC is one of the world’s largest banking and financial services organisations, serving 40 million customers. It is the eighth-largest bank in the world and holds $2.96 trillion in assets. There is a good reason why it’s raising interest rates. It would not have doubled down payments for mortgages on a whim. HSBC has done so because it senses a storm approaching Malta’s property market. It wants to reduce its exposure when that storm hits.
The Bank of England has raised interest rates for the tenth time in a row. Its benchmark rate is now 3.5% to 4%. The US Federal Reserve raised its lending rate to a 15-year high – from 3.75% to 4%, and its chairman Jerome Powell warned that rates are likely to move up again. The European Central Bank raised its interest rate to 2.5% and is widely expected to raise it further to 3% in March. Local banks will have to raise their rates too. Getting a loan will become even more costly. Fewer and fewer people will be able to afford one. Demand for the massively oversupplied market will crash.
Making matters worse, Malta faces increasing pressures to terminate its golden passport scheme. Portugal has just ended its scheme. So has Ireland. So has Cyprus. Fewer rich foreigners mean fewer property sales.
Just days earlier three local economists warned that there is a real risk that Malta’s property bubble may burst. They highlighted three key factors that will burst that bubble – rising interest rates, less foreigners purchasing property, and property prices rising way faster than earnings. The price of property in Malta has doubled since 2013. Wages have increased by just 30%
HSBC can see that all three of those factors approaching and it is acting to protect its interests. Robert Abela can see it too – which is why he’s panicking. And trying to influence decisions taken by the banks.
Abela’s amazing power forced HSBC to issue a company statement. They backtracked on their 20% down payment, pulling it back to 10% for first time buyers. HSBC Malta’s CEO even claimed it was just a mistake. But their original statement insisted that the bank will continue to “align its risk appetite and credit criteria”. The increase in interest rate from 2.7% to 3.1% was retained. And those purchasing a second home will still need to fork out 25% of the total value instead of 15%. HSBC will still batten down the hatches. Other banks will be constrained to ignore Abela and follow suit as international lending rates rise. APS bank has just warned that interest rates may go up. Even Abela can’t stem the tide.
That is bad news for first-time buyers. It’s bad news for the MDA and Labour’s development kings. It’s bad news for Labour. But it’s even worse news for all of us. We know that Labour will protect its friends, the developers, before it protects citizens.
Abela’s immediate public shaming of HSBC is in stark contrast with his long months of dallying before publishing the Miriam Pace inquiry report. It’s completely different from his slothful reaction to Jean Paul Sofia’s death and his appeals to let the institutions work in serenity.
The banks are institutions too but Abela has no qualms pressuring them to ignore all the market’s warning signs.
We all know why Abela springs into action in some circumstances but crawls up into a ball in others. He’s swiftly galvanised into action when his friends’ and business partners’ interests are at risk – because his own interests are intertwined with theirs. He returns to his stuporous state when people’s lives are brutally ended by his developers’ machismo.
Abela brazenly appointed Joseph Portelli’s architect, Maria Schembri Grima, to head the industry’s regulator – the Building and Construction Authority. With his backing, Schembri Grima felt untouchable. She was the architect responsible for the dangerous demolition job on Psaila Street when bricks and concrete rained down onto the road. Her disregard for public safety was complete. She’s now been forced to resign. She now faces a disciplinary probe by the Chamber of Architects.
That sums up Abela. He knows appointing Portelli’s architect to head the BCA was wrong and reckless. But his top priority is shamelessly aiding his business partners and the mega-developers who fund his party. The nation’s interests can wait.
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The construction bubble bursted everywhere in the civilized world, but the Maltese PL Gahan government wants us still to believe that it is still our chicken withthe golden eggs. We will be soon Greece 2.0
The guy is evil personified. Period.
Someone pressurised Bank of Valletta to no longer offer fixed deposits – a direct message to cash in and buy rental return property from the said MDA moguls. .
Konna nahsbu li Muscat hu l-qiegh ta’ kull deni, Abela jahartu bil-kbir. Qiegh wara qiegh.
The scandals one after the other made me lose trust in this government. It is clear that this government is abusing us and it isn’t there to safeguard the nation’s interest. We have seen that in the Vital’s deal.
Il bosk b hadbu jinharaq
Can’t help thinking that a requirement of a 20% deposit from All banks would have seen a dramatic fall in (inflated) prices. One of the reasons for high prices is easy access to financing. Might have taken some time but the market would have found it’s own level.
It is in the buyer’s interest to pay a higher deposit as this results in a significant reduction in the total amount of interest paid. It might slow down the increase of housing prices however keep in mind that many newlyweds would have paid that same amount on a 3 or 4 hour reception.
Casino Maltese PL. In the end of the day, the Bank always wins.
In recent times, everything that Joseph Muscat ‘invented in order’ to become a ‘global player’ himself and thus trying to promote Malta as being on equal level with the other rich countries where his IIP Scheme customers came from, is backfiring on himself. If it would be just for himself, I wouldn’t have any pity, but like in the old MLP days, so with the PL since 2013, Malta suffers. Different times, with different means but the same result.
That the property bubble is due to bust with an persisting upwards trend and more money up to the hilt is just a matter of time. One has seen the like of this before, years ago and what came afterwards very shortly, was the Euro crisis.
This is called mismanagement at the top level and as it always is, the big-heads get away with it and the those left behind, the citizens, have to carry on with the burden. Nothing about accountability, responsibility and serious management with foresight. The PL, or say Joseph Muscat and Robert Abela as the top leaders, only had their foresight on the quick money and lots of it. They really thought that this will go on endlessly. Now they have to face the music themselves as the tide is turning.
I am not surprised to read more often these days how the PL is dishing out the good jobs to their chums in order to give them the chance to make as much money as they can while they can, whether it is through jobs in the public sector or the building industry / property market. they know that this is all coming to an end but they don’t tell the people.
Malta deserves better, but I am afraid that until the next GE, the PL will have managed it to ruin Malta totally, just like the Tories in the UK are persisting and succeeding in ruining the UK with Brexit and their way of mismanagement which isn’t quite that much different from the PL rule in Malta, when it comes to ‘friends in high places’ and cronyism.
It is evident that when inflation is high and persistent, the first assets to suffer stiff demand are those with high prices and the real estate sector is no immune to such shocks and possible downfall in due time. Unfortunately, this tiny country of ours has become too much dependent on the mass importation of cheap labour and mass tourism which would in turn inflate the need for more accomodation, followed by higher and more unaffordable prices. If the first two variables will go down in numbers fast, the supply for accomodation will follow suit, impacting the economy at large. This is the recipe of the Labour Party in Government, the party of the mega developers, ruthless businesses who exploit cheap labourers, speculators, freak politicians and fraudsters who run with our money out of the country. Wow, what a mix!
Pajjiz kissruh minn kull aspett, uliedna ghad iridu jiggieldu biex jghixu go pajjizhom, il barranin u negozjanti hadulna pajjizna bil-barka ta dan il gvern.
Malta becoming Greece 2.0 is then another backlash on Joseph Muscat. One might presume that all this attracting of foreign investment and the IIP Scheme was to prevent Malta from being at the mercy and bailout by the IMF and the EU, like in the example of Greece during the Euro crisis.
In fact, his real intentions were more on a personal note which has become evident and for everybody to see. It also could be both, the creating of a win-win situation for himself and his chums with Malta as the ‘fig leaf’.
Either way, Joseph Muscat’s ‘Ivory Tower(s)’ and all his concepts on which he has build this upon, are crumbling. He knows that himself and there is a very good article by Kevin Cassar on the Times of Malta website by the title ‘Joseph Muscat’s panic’ which sums it all up.
Well done for all your truth revealing articles. Please darken the orange printed sections. They are too pale to be read easily. Red in my opinion & would do much better. Thank you so much .
I believe in sayings like, we reap what we sow, garbage in garbage out. and good or bad happenings both come to an end, What about you ?