Reaching a higher sustainability in property sector
It is obvious therefore that there is a great need to both regulate and enforce greener building standards as quickly as is possible, and in addition, to retrofit existing building stock which is largely regarded as poorly built and insulated
by George M. Mangion
Many actors in the speculative building sector have been rubbishing warnings about an overpriced stock scenario, in their drive to continue support expansion in luxury villas, hotels, shopping malls and commercial property. They engage trusted consultants to publish surveys which invariably show how resilient is the property arm of the economy. This ignores the fact that while it is a grand revenue generator by way of property taxes and PA licences, ample employment of low-skilled TCN’s - yet its net contribution to GDP is minimal.
Naturally, as land is so scarce, most argue that the current trend of building higher units will beat the incidence of a drop in demand and a consequent slide in property prices. Just reflect how between 2026-2028 construction industry grew by an estimated 89%. The other side of the coin is bank financing. Local banks are also gingerly financing mega developments on the understanding that pollsters show no evidence of a property bubble which can burst leaving a significant correction in resale prices.
A gentle bursting of the frenzy, can lead to a rapid decline in property values, potentially resulting in financial losses for homeowners, banks and investors. On a social aspect, the government is trying to fight a commonly held view that property prices are unscalable for low-income cohorts by having the Housing Authority subsidizing to build more affordable housing. The influx of foreign workers and the demand for renting of private accommodation from budget-conscious couples created the necessary demand that fuelled the exponential growth in supply. Yet, first-time buyers, are facing an insurmountable escalation in prices.
For a basic flat without a garage; this has shot up in value, depending on location, to reach €350,000 unfurnished. One car garage with services can easily reach a price of €55,000. It is a consolation to observe how Malta’s strong banking sector has long been the country’s backbone, supporting the growth of various sectors. Capital buffers retained by local banks are among the highest in Europe, and banks have consistently returned solvency ratios that are almost double the EU average. All the same, it is a fact that elevated exposure to house loans (mortgages) and mega property development is becoming a prominent component of local bank loan portfolios.
Observers, frequently ask whether an assessment is made by ERA and PA to arrive at the true reckoning of demand for luxury villas/apartments and commercial properties as developers continue to rush applying for new permits. Their greed is exemplified by the gravy bandwagon - make hay while the sun shines. Will future demand hit a slowdown given the low fertility rate and an aging population which, in itself does not augur for erecting more expensive units. If an epiphany, occurs this oversupply can lead to a slowdown in construction activity and negatively impact employment within the sector.
It is encouraging to note that 80% of residents own their property but there is an emerging trend that more are resorting to rent, due to the explosion in housing stock values. It stands to reason, homeowners may feel less wealthy if property values decline, potentially leading to reduced consumer spending and a mild economic slowdown. Let us review some of the mega developments which have recently been approved by PA and ERA.
The list is long, and not exhaustive. Here, one can mention the massive Villa Rosa project (under review by court) and the ITS site project in St George’s Bay; the Xuereb Tower and Mercury Towers in St Julian’s; Manuel Island city, 1000 new flats in Gozo, Town Square in Sliema; the Metropolis and the ST Tower in Gżira; the Shoreline in SmartCity; the Mistra Village development; and the Quad in Mrieħel. Naturally, this list excludes many projects still under application which will be approved by end of this year.
One is looking at an additional 20,300 square metres of new restaurant/bar area; an additional 60,700 square metres of new retail area; an additional 89,000 square metres of new office area. Regrettably quoting Malta Enterprise saying an imminent influx of multi-national companies attracted to bring their manufacturing base in Malta is still in progress. Again, is consideration being taken by INDIS of the future release of factory space when robots and AI mechanization replace the older style of manufacturing.
Recently, top estate agents are surreptitiously noticing the amount of office space on the market has exceeded demand, and as a result, requested rents are falling. Add to this conundrum, the direct investment by Castille in its own grandeur projects. A resounding example is a large, unfinished showroom in the periphery of Zejtun rented by the government for a fixed term at aggregate value of €25million. This property saw the housing of a number of government-controlled agencies such as Finance Malta, Gaming Malta, the Companies house, plus a top audio and fully functional hall - ideal for public meetings. This shell form property cost another €11.5 million to refurbish.
Another fly in the ointment is that government is a major landowner so why spend millions in buying third party commercial property. Moving on, sustainability in building sector is crucial. Notice how an estimated 94 percent of buildings were built before the introduction of the Technical Guidance: Minimum Requirement for Energy Performance in Buildings in 2006. There seems currently little integrated Government ‘Green Building’ Policy independent of EU framework targets & policies.
There are some small projects of low energy, low carbon or award-winning buildings of some repute but there is no visible introduction of widespread ‘green building standards’ as in other countries. Whilst the recent Low Carbon Strategy issued by the current administration in 2017 stated that “Low carbon development and investment is needed in areas where there is high potential for decreasing carbon and where diversification is possible” the areas identified for action do not include any priority to the construction industry and the recent detrimental issues including collapsing buildings and air quality.
There is currently no dedicated official “Green Buildings Standard” in Malta, but surely now is the time to demand one. It is obvious therefore that there is a great need to both regulate and enforce greener building standards as quickly as is possible, and in addition, to retrofit existing building stock which is largely regarded as poorly built and insulated.
