Bank lending for property and development planning in Malta

Abstract

This dissertation analyses bank lending for property and its interaction with development planning in Malta. In the past, Government's strong presence in the banking and planning systems led to inefficiencies in the bank lending sector and the wholesale waste of scarce land resources. With unprecedented high levels of property loan portfolios, a fall in property prices is not in banks' interest especially due to non-property loans being secured by property. But if the gap between property prices and average personal disposable incomes continues to widen a social crisis might ensue. Property entrepreneurs seem not to have realised that their power relationship with Government as owner, regulator and administrator of the banks has fizzled out and that a new banking culture is here with HSBC' s entrance into the local banking sector. Government's soaring debt means that developers can no longer count on Government projects that would boost their incomes and property investment capabilities, and solve their cash flow problems. Although the banking and planning systems are both crucial in the development process, the planning system is the decisive gatekeeper because of its exclusivity. The power that is vested in its administrators must therefore be geared towards ensuring that the planning system gives a timely response to new development opportunities that would be beneficial to the community. Plans have to be implementable and provide for the feasibility of projects. If this is not achieved, then opportunities emanating from possible European Union membership and the use of Structural Funds might be lost. The instrument to achieve this lies in a less centralised planning system.