‘In-Nazzjon’ jewel

▪️ ‘In-Nazzjon’ jewel ▪️ Free market worries ▪️ Mortgage facts ▪️ Rush to judgment

If you want to find some examples of rubbish journalism, it might serve you well to read In-Nazzjon every now and then.  The latest “jewel” was a heading: ‘Prices in Malta are double those in Italy” (16 April 2024).  When I read the headline, I was sorely tempted to write to the Prime Minister to protest about this.  But I managed to calm down and convince myself to do some desktop research.

Of course, I had a big challenge.  You see, the heading was based on what a Sicilian girl who is currently living in Malta told the paper.  What more reliable source can there be?  I am all for listening to what people have to say, but if a group of Sicilian girls (and there are quite a few of them in Malta) were to tell me that prices are 50%, 60% or 100% more expensive than in Sicily, which one of them would I believe?  Or would I simply average their figures to conclude that prices here are 70% more expensive than there?  I suppose that’s what the incompetent “journalists” at In-Nazzjon would do.

So, I looked up various websites which give comparisons between the cost of living in Malta and Sicily.  Here again one finds a vast range of comparisons   ̶   none of them from official sources and most of which give lists of items without telling you what the overall figure is.  Now, one’s shopping basket does not consist of food alone and it is not the case that one buys a fridge or a suit every day. Nor does it follow that the prices in Sicily are standard, because they would vary from city to city, so you will immediately realise that obtaining an overall figure is not that straightforward.

For example, a cappuccino in Palermo costs 11% more than it does in Trapani, while the daily cost of food in Palermo is said to be 17.5% more than that in Trapani.  One website gives the daily cost of food in Palermo as being 17% more expensive than in Trapani.  Again, the monthly rent of a one-bedroom apartment in Palermo’s city centre would be 66% more expensive than that of a similar one in Trapani.  There are equally significant variations between different localities in Malta. 

I mentioned before that shopping baskets are not necessarily the same in any two countries.  Thus, while food and beverages have a weight of 182 and 180 in Italy and Malta respectively, the share of clothing and footwear in the shopping baskets of Italy and Malta are 68% and 41.4% respectively.

That is why there is a whole army of statisticians in the EU busily updating household consumption surveys and prices and standardising them to come up with a monthly Harmonised Index of Consumer Prices. But all this does not matter to In-Nazzjon.  What is important is getting the catchy headline that prices are double.  After spending a whole hour comparing prices and different websites, there seems to be a clear indication that prices in Malta are some 5% higher than in Italy (not Sicily).  Far from double.

In-Nazzjon attributes this alleged huge difference to the “explosion in prices” in Malta.  By inference, it is claiming that prices in Italy did not explode, though the Sicilian girl apparently did not have anything to say about this.  So, I looked up the statistics published by Eurostat.  Lo and behold, I found that, comparing pre-Covid prices with those in 2023, inflation in Italy was 17.2% compared to 15.4% in Malta.  Explosion, indeed …. but in In-Nazzjon’s fertile imagination.  

At the end of it, I told myself: “But, wait a minute, if this Sicilian girl is finding that prices in Malta are double those in Malta, why is she living here?  In-Nazzjon did not bother to ask or, if it did, decided not to tell us.  Could the reason be that in Sicily there is an unemployment rate of 16.6% whereas in Malta it is just 2.6%?

Free market worries

More countries are embracing measures to enhance their own security and independence, a trend that some say could slow global growth.  Copying the United States and China, France, Germany, and Italy recently pledged to pursue stepped-up efforts to protect their own homegrown businesses.

There is now a steady parade of countries that are enthusiastically adopting industrial policies — the catchall term for a variety of initiatives like tax incentives, targeted subsidies, trade restrictions, and regulations — meant to steer an economy.  More than 2,500 industrial policies were introduced last year, roughly three times the number in 2019.

Protectionism is generally popular domestically, but the trend is worrying some international leaders and economists who warn that such top-down economic interventions could end up slowing worldwide growth.  “There are different ways of shooting yourself in the foot,” M. Ayhan Kose, the deputy chief economist of the World Bank, said about the trend of rich countries pursuing industrial policies. “This is one way of doing it.”

Faith in the superiority of free market policies was deeply shaken over the last decade by a string of global jolts — the pandemic, supply chain meltdowns, soaring inflation and interest rates, Russia’s invasion of Ukraine, and rising tensions between the United States and China.  In many countries, security, resilience, and self-sufficiency rose to the top of the list of economic policy goals along with growth and efficiency.

Photo: www.vecteezy.com

After years of complaints about China’s subsidies of private and state-owned industries, the United States and Europe have increasingly copied Beijing’s playbook, undertaking multibillion-dollar industrial policies focused on critical technology and climate change.

In general, positive appraisals of industrial policies have grown in recent years. A team that included Dani Rodrik, a Harvard economist, established that a whole crop of recent papers offers in general “a more positive take on industrial policy”, compared with the traditional “knee-jerk opposition from economists”.   Joseph E. Stiglitz, a Nobel Prize-winning professor at Columbia University, has called industrial policy a “no-brainer”.

But many economists like Ayhan Kose, Deputy Chief Economist of the World Bank, remain sceptic, arguing that most industrial policies will end up reducing overall growth, making things worse rather than better.  It is easy to get things wrong, by misallocating or wasting money, giving powerful business interests too much sway over government decisions or setting off a tit-for-tat trade war.  Governments meddle in markets for all kinds of reasons — to prevent job losses, spur investments into a particular sector or freeze out a geopolitical rival.

In February, the European Parliament voted to increase its own green industrial capacity and in March the bloc adopted regulations to secure its supply of essential raw materials and bolster local production. Members also proposed a joint defence industrial strategy for the first time.  Now that the term ‘industrial policy’ is no longer taboo, says Mr Le Maire, France’s finance minister, “Europe needs to show its teeth, and show that it’s determined to defend its industry.”

Only time will tell what this new phase of government interventionism will have a happy outcome.

Mortgage facts

I was pleasantly surprised last week when I came across an article published on Business Now wherein the architecture firm DHI Periti were said to have made a study that shows, based on the firm’s data going back 40 years, that property is more affordable today than it was in 1982.

Sceptics would immediately argue that this cannot be because, while residential property values have increased 16-fold over the period, the median wage only increased some seven times over.   But DHI Periti calculate that the monthly mortgage payment for a three-bedroom apartment increased only by just six times over.  This explains why the housing affordability index increased from 77 in 1982 to 98 in 2022 – indicating a significant improvement.

In support of this unexpected result, the study shows th following: first, the mortgage rate dropped by around eight per cent 40 years ago to under three per cent today – making home loans much cheaper to obtain; second, the maximum term has been extended from 25 years to 40 years, stretching out the repayments over a longer period of time, making them more manageable; and third, most households today have more than one wage earner, with female labour market participation at record highs; fourth, the deposit paid on a house used to be 20 per cent, as compared to just 10 per cent today, and current buyers also save on stamp duty thanks to a scheme whereby first-time buyers are exempt from stamp duty on the first €200,00 of their property’s value.

Of course, the past is not a guarantee for the future.  In fact, a report by Grant Thornton and real estate firm Dhalia last year found that, were interest rates to increase by just 1.2 per cent, even households earning a median income would be priced out of the market.  In fact, the head of the Housing Authority’ policy department, Brian Micallef, admits that the impact of bank lending policies can be “crucial” in enabling first-time buyers to secure the necessary credit.

Households by Tenure Status – %
Owner without mortgage59.459.2
Owner with mortgage20.423.4
Tenant at market rate2.27.5
Tenant at non-market rate18.09.9
Source: Eurostat

Speaking to Business Now, DHI Periti founder Denis H. Camilleri adds that buyers need to be more assertive and not just accept the prices given.  “We are often surprised that certain properties sell for the asking price,” he says. “Then we speak to buyers, and they say they don’t have the time to shop around for the right property. So, it’s the most important investment of your life, but you don’t have time for it? That’s worrying.”

Going back to the DHI Periti statement, the studio posited that a 25-year-old is “the perfect age” to purchase a property, since the mortgage repayment would be stretched out on the maximum possible number of years.  It points out that waiting five years would increase the monthly payments by 10%, while waiting 10 years would increase the monthly commitment by 20%.

The table shows that the percentage of people renting property has declined by 2.8% to 17.4% over eight years (57% of whom are renting at non-market or reduced rates), whereas those who own their own home (72% of whom own their home without a mortgage) have increased by 2.8% to 82.6%.  The increase in the percentage of tenants – particularly tenants who pay a market rate  ̶  is surely largely due to the increase in the population of third party nationals.   

My conclusion is that all the hype about people not being able to afford to own their home is grossly exaggerated.

Rush to judgment

No sooner than something happens that hundreds of people log into Facebook to have their say, often relying on fake news and misinformation, with a good dollop of xenophobia.

It happened recently when a bus driver was slammed on social media for “blocking an ambulance”.  Of course, as bad as the alleged blocking was the fact that the driver was foreign. No Maltese driver would ever commit the act.

It turned out that the driver had no choice because the concrete truck in front of the bus had collided with another vehicle.  Reversing would have been dangerous for the bus passengers.  Contrary to the impression given by an amateur video that the bus could have moved close enough to a walk to allow the ambulance to squeeze through, this wasn’t the case.

Student platform Freehour posted the video with the words “’a**hole’ – bus driver blocks ambulance from passing in St Julian’s”.  They were quoting the ambulance driver’s comments. But Malta Public Transport noted that the driver had no choice.

So, it seems the real a**holes were the people who rushed to judgment and those running the student platform.  Naturally, none of them were men enough to apologise for their error.

0 0 votes
Article Rating
Notify of
Inline Feedbacks
View all comments