Property bubble? 

Property bubble? ▪️ Crypto haste ▪️ Inspiring women

A couple of weeks ago the European Central Bank said that the sinking commercial property sector in the Eurozone could struggle for years, posing a threat to the banks and investors that financed it. The warning was made in a financial stability report which highlighted the property boom that is now unravelling in countries such as Germany and Sweden.

In the last couple of years prices in Euro area residential real estate (RRE) markets rose at a record pace, “resulting in increasingly stretched valuations”.  Nominal house prices rose by 9.6% year-on-year at the Euro area level in the fourth quarter of 2021, the fastest rate observed in the last 20 years. The upward pressure on prices was mainly due to the low cost of borrowing, coupled with stronger demand for housing stemming from shifts in household preferences (e.g. demand for home office space) and supply-side constraints.

Additionally, shortages of both labour and materials have raised expectations of increasing prices in the construction sector, contributing to further upward pressure on house prices going forward. The growing supply-side constraints, together with flight-to-safety effects amid higher inflation, have been somewhat exacerbated by the Ukraine war. As house price dynamics exceed the fundamentals, estimates of overvaluation are also growing.

Finally, accelerating mortgage lending has increased household indebtedness, raising concerns of further debt-fuelled house price rises. Lending for house purchase in the Euro area remains robust, with the pace of growth at 5.4% in March 2022, contributing to the build-up of household debt.

Patterns vary greatly from country to country: in some Euro area countries, upward movements in both house prices and lending are pronounced, indicating that a price-loan spiral may have started emerging. One thing, though, is very clear: Malta is not one of these countries.

As an example, house prices in Germany have sustained quarterly losses of between -3.6% and -9.9% between the fourth quarter of 2022 and the second quarter of 2023, while those in Sweden fell by between -3.7% and -6.8% over the same period.  Similar losses were experienced in Denmark and Finland.  On the other hand, prices in Malta rose by between 4.5% and 5.9%.  Annual deflated prices show the same pattern.  So much for the property bubble prophesied by the prophets of doom.

Neither is it true that house prices and rents are over-inflated.  In fact, while the average price of residential property in Malta has risen by 65.5% between 2010 and the second quarter of 2023 – above the Eurozone average of around 40% – this is much lower than price rises of between 75%-200% in 12 other EU countries.  Looking at the level of rents, Malta’s increase was around 44% compared to an EU average of 19%. Again, there were very wide differences between individual countries.

Mortgage lending growth in Malta was about 12% compared to the Eurozone average of just over 5%, the price index was just over 4% compared to the Eurozone’s 9.5%, and the size of the household debt-to-GDP ratio was one of the smallest in the zone.  Malta’s percentages were such that the European Central Bank has not issued any warnings, unlike in the case of the Baltic Republics, Germany, the Netherlands, and Austria.

This is not to say that such ratios should not be kept under regular review, but they certainly mean that Malta’s figures do not indicate a build-up to medium-term vulnerabilities.

Crypto haste 

Binance chief Changpeng Zhao hasstepped down and pleaded guilty to breaking US anti-money laundering laws as part of a $4.3 billion settlement resolving a years-long probe into the world’s largest crypto exchange.  The deal, which will see Zhao personally pay $50 million, was described by prosecutors as one of the largest corporate penalties in US history. It is another blow to the crypto industry that has been beset by investigations and comes on the heels of the recent fraud conviction of FTX founder Sam Bankman-Fried.

Several legal experts said it was a good outcome for Zhao, leaving his vast wealth intact and allowing him to retain his stake in Binance, the exchange he founded in 2017.  Binance broke US anti-money laundering and sanctions laws and failed to report more than 100,000 suspicious transactions with organisations the US described as terrorist groups including Hamas, al Qaeda, and the Islamic State of Iraq and Syria, authorities said. The exchange also never reported transactions with websites devoted to selling child sexual abuse materials and was one of the largest recipients of ransomware proceeds.

Photo: Benoit Tessier | Reuters

The reason why this concerns us is that it puts under the spotlight the shady activities of the world’s cryptocurrency exchange during its unregulated grace period between October 2018 and October 2019 in Malta.  Binance’s operation was approved by the MFSA under blockchain legislation that allowed crypto companies to apply for licenses to operate from Malta before they became compliant with regulations which were being drafted.

The MFSA was warned that there was a risk that cowboy operators might use this grace period to conduct illicit operations without proper checks of their compliance with anti-money laundering laws.  The MFSA ignored the warnings. The worst happened and Zhao’s prosecution is testament to that.  According to US Attorney General Merrick Garland, “Binance made it easy for criminals to move their stolen funds and illicit proceeds on its exchanges.  Binance also did more than just fail to comply with federal law. It pretended to comply.”

The saga shows that it is never advisable to rush into something without first having the proper legislation and enforcement in place, particularly when one is talking of an industry that is in its birth pangs.  Instead of making sure that good governance and quality regulations earned us respect, we allowed hype and crazy speed to shape policy.  Pity.

Inspiring women

The BBC recently published a list of 100 inspiring and influential women from around the world for 2023.  Some are well known names, such as attorney and former US First Lady Michelle Obama; human rights lawyer Amal Clooney; feminist icon Gloria Steinem; and Claudia Goldin, US economist and Nobel Prize winner.

The BBC list was based on names gathered through research and those suggested by the BBC’s network of World Service Languages teams, as well as BBC Media Action.  The candidates had all made headlines, influenced important stories over the past 12 months, or achieved something significant or influenced their societies in ways that wouldn’t necessarily make the news.

In a year where extreme weather conditions and natural disasters have dominated headlines, the list also highlights women who have helped their communities tackle climate change and adjust to its impacts. Take journalist Carolina Díaz Pimentel from Peru.  Diagnosed with autism in her late 20s, Pimentel baked herself a cake to celebrate the fact that she now knew she was neurodivergent. Now in her 30s and “proudly autistic”, she is a journalist specialising in neurodivergence and mental health coverage. Díaz is keen on ending the stigma faced by people with psychosocial disabilities.

No one could be more different than Afroze-Numa from Pakistan.  She is one of the last Wakhi shepherdesses tending to their goats, yaks, and sheep in Pakistan’s Shimshal valley.  She learnt the trade from her mother and grandmothers, and she is part of a centuries-old tradition that is now dying out. Every year, these shepherdesses take their flocks to pastures 4,800m above sea level, where they prepare dairy products to barter, while their animals feed.  For over 30 years, Afroze-Numa and other shepherdesses have brought the village prosperity and used their income to provide an education for their children.

Another woman on the list is a demonstration of the adage that age us just a number – she is Licia Fertz from Italy.  Not many 93-year-olds can say they have more than 235,000 followers on Instagram, but for Italy’s oldest body positivity influencer, that’s just the beginning.  A model and influencer, Fertz lived through World War Two, endured the death of her 28-year-old daughter and saw her husband die.  But when her grandson opened an Instagram profile for her to cheer her up, her colourful outfits and radiant smile made her an instant social media star.  She has written an autobiography and modelled nude for the cover of Rolling Stone magazine at the age of 89. She is an anti-ageism, feminism and LGBTQ+ activist, promoting body positivity and reshaping how we perceive ageing bodies and the elderly.

Dr Natalie Psaila. Photo: James Bianchi/MaltaToday

The list also includes Dr Natalie Psaila from Malta.  She was selected for her advocacy for the decriminalisation and legalisation of abortion and better access to contraception. Psaila co-founded Doctors for Choice Malta and has established a helpline that gives support to women before, during and after abortion. She has also published a sex education book aimed at 10 to 13-year-olds called My Body’s Fantastic Journey, to help improve knowledge of reproductive health in Malta.Like all lists, one can criticise the BBC one for its choice of certain names or for its failure to include what other people might say are more influential women.  No doubt, Psaila’s name will be controversial in Malta.

Main photo: Polina Kovaleva

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