WATCH | Gordon Cordina: ‘Malta’s property market is driven by fundamentals, not speculation’

Bank of Valletta Chairperson Gordon Cordina pushes back against fears of a property bubble and tells Nicole Meilak Malta’s economic model balances growth with resilience. He says modern banks now battle cybercrime and climate risk as much as financial shocks

Property has long been seen as a safe and almost necessary investment for any person to make, but as prices continue to climb steadily, more people are feeling priced out of the market. However, BOV chairman Gordon Cordina says the property market is safe so far because the growth rests on fundamentals. 

For Cordina, price growth of 4-5% annually, broadly in line with GDP expansion, is reasonable from a purely economic perspective, but he acknowledges that just because it makes sense economically, it doesn’t mean it will feel reasonable to first-time buyers facing larger loans and longer repayment horizons.  

He steers clear of using the term “bubble” to describe the property market, as that would imply price inflation driven solely by expectation. He says Malta’s increases rest on fundamentals: Economic growth, liquidity and diversified employment supporting mortgage repayments. 

Liquidity is central to his argument. He says Maltese households also hold substantial deposits and government securities, reducing the risk of forced property sales that might destabilise prices. Moreover, mortgage exposure is indirectly diversified across sectors because repayment capacity depends on employment income, not property values alone. 

Property risk looks contained, but cyber risk keeps bankers vigilant. He says modern banks no longer just take deposits and issue loans, but they also police financial crime, defend against digital threats, and increasingly shoulder responsibility for environmental impact.  

Climate risk is now also embedded in regulatory scrutiny, particularly from the European Central Bank. Scenario modelling goes far beyond storms like the recent Storm Harry, encompassing sea-level rise, prolonged drought and systemic climate shocks. Cordina says climate mitigation efforts will be slow to show results, but adapting to climate change through stronger infrastructure and better construction standards is urgent.   

Zooming out, Cordina frames Malta’s broader economic model as a balance between growth and resilience. A small island at Europe’s periphery has survived, and prospered, by cultivating multiple independent sectors, including tourism, specialised manufacturing and services. The secret sauce is making sure none are so dominant that a single shock could bring the system down. 

The following is an excerpt from the interview. 

The IMF recently warned about the concentration of lending related to property. Many people see property not only as their home but as a long-term investment. But at what point can this concentration become a systemic risk? 

As long as the economy continues to grow, there is also a strong probability that the value of land and property will continue to increase, as more money circulates due to economic growth. So, it should not come as a surprise that, when compared to other countries, Malta shows a higher concentration in property. Commentators and analysts would do well to compare Malta not only with other countries, but perhaps with territories of similar size—or slightly larger—such as certain cities abroad, where you may also find this type of concentration in property. 

Is this type of concentration currently a cause for concern? I do not believe so. If you examine how national wealth is distributed, it is true that a substantial portion is in property. However, it is also true that there is a substantial amount held in liquidity—bank deposits, government bonds or stocks—which can easily be liquidated. Therefore, we are not seeing a situation where any individual or section of society would be under significant pressure to sell property, thereby pushing prices down, as sometimes happens in other countries where liquidity in the financial system and the economy is lacking. 

You said there isn’t a property bubble. You believe property price growth is reasonable. What would need to happen for you to change this view? 

The term ‘reasonable’ means different things to different people, so let me clarify what I meant. 

I was speaking purely from an economic perspective. Property price increases of around 4–5%, which are moving broadly in line with the growth of gross domestic product—what the country produces and earns each year—are economically reasonable in that sense. 

That does not necessarily mean that, if I look at property from a social perspective, I would conclude that it feels reasonable to someone in the first-time buyer category, who may be struggling to keep up with prices that they experience as burdensome. That person might argue: “I need to take on a larger loan, incur greater expenses, and commit myself for much longer over the course of my working life in order to repay that debt.” 

These are all different realities. As I mentioned earlier, property serves different purposes for different people, and each person will naturally assess what is “reasonable” from their own perspective. 

What worries you most: Property risk or cyber risk? 

You’re essentially asking whether I’m more afraid of drowning or burning. The truth is, I need to be vigilant on both—both are real risks. 

They are risks that could create problems for the country and for the bank. At present, I am satisfied that we are managing these risks in an adequate manner, and in a way that also satisfies our regulators. But you can never say you have won this war. New developments are constantly emerging. You must continue running your business, while always keeping risk management at the forefront of your mind. 

A few weeks ago, Storm Harry caused significant damage across the islands, leading to material losses to homes and businesses. How are you assessing climate risk? 

These factors are being studied, particularly because our regulators—primarily the European Central Bank—have, in recent years, begun requiring detailed assessments of the impacts of climate change. 

And I can tell you that the scenarios we analyse go far beyond strong winds like those we recently experienced. They include more advanced and severe projections: Intensified storms, rising sea levels, prolonged droughts, even the emergence of new diseases. In other words, the type of climate studies we conduct examine catastrophic scenarios, so that we can then determine what measures need to be taken to ensure risks are managed as effectively as possible. 

Climate change is clearly a risk. There is little point in debating whether it is caused by human activity or not. It is happening. And if it is happening, we have an obligation to try to limit it as much as possible. 

Do you think Malta’s current economic model is more optimised for growth or for resilience? 

I would like to answer it by saying that we should aim for an economy which, because it is growing, becomes increasingly resilient—or, conversely, because it is resilient, has more space to grow. In other words, the ideal is a win-win situation. 

But let me dig a little deeper. If you look at a map of Europe and notice a small dot at the bottom, you might say there is no logical reason why there should be a population there, nor why there should be an economy. And yet, historically, over hundreds of years, there has been a population here and it has grown. An economy has developed. 

Malta has consistently sought to maintain four or five sectors that are independent from one another. That independence is important. If one sector suffers a shock, the others are not hit as hard. 

At the same time, each sector had to be one where development on a small scale could still generate meaningful returns. We cannot rely on sectors that require massive scale in order to be viable because such sectors simply do not suit our size. No single large sector dominates.