The latest KPMG annual construction industry study, which is regularly commissioned by the Malta Development Association (MDA), shows that buyers are still seeking property, for residential use or as an investment.
The MDA also counts on a constant incoming stream of information about industry developments and how the market is reacting to changes, in real time. This includes information about sales outlooks, promises of sales, contracts drawn up, and so forth. This, in turn, brings to light the level of bureaucracy imposed on the sector and how investment therein is impacted.
However, the MDA warned that the construction industry and the property market are facing serious challenges.
We are seeing that contracts are taking longer to close, also due to the extended time-frames required by the banks to issue sanction letters. The opposing forces of increased costs and limitations of land supply are negatively impacting investor profits. Additional challenges in the industry are also created by the lack of skilled labour and objections to developments.
“developers, architects and ultimately, the investors become entangled in appeals which overturn the originally approved development”
The natural lack of land availability on a small island like ours is exacerbated by objections to land development, even in areas which have been approved by local planning legislations. NGOs are objecting to developments even when they are located in areas which have been specifically earmarked for construction. Therefore, developers, architects and ultimately, the investors become entangled in appeals which overturn the originally approved development.
These factors are creating an increase in prices, which is further spurred by the increase in raw material costs, the increasing price of land and the costs of drawing up construction plans and obtaining relevant permits.
We have reached a stage where a developer requires an architect and a lawyer practically on retinue, in order to operate in this industry. This eats out of profit margins and escalates selling prices in equal measures.
Whilst there are indeed objections being submitted which have grounds for consideration, the sheer quantity of irresponsible, unfounded objections being submitted by neighbours, NGOs as well as local councils have caused the developers’ job to become even more cumbersome, with some objections causing delays of months and years, and engaging in frivolous or misguided discussions which neither offer concrete reasons nor alternative solutions.
Today, some 80% of the indigenous local population consists of property owners. We are aware that in order to purchase their properties, most of Malta’s local buyers have made significant economic sacrifices. Or perhaps they have inherited the land from their parents, who would have invested their hard-earned cash in these assets, with a view to also leave them to their children. And yet, challenges to their buying their properties are further compounded by policies which are prone to misinterpretation. Things would be far easier if it were not possible for decisions to conflict with each other, as this inevitably gives rise to uncertainty and instability in the industry.
“challenges … are further compounded by policies which are prone to misinterpretation”
During Covid, the MDA had secured an agreement with the Government to decrease stamp duties and taxation on property, in order to enliven the industry during the pandemic. While these measures are now being lifted, the demand for property has remained constant. But the supply is steadily decreasing and becoming even more precious.
While we wholeheartedly support greener building, many regulations which have been implemented to prompt our greener direction have heftily upped costs of further development; an increase in costs which will ultimately need to be absorbed by buyers.
Any additional European taxation on raw material will further contribute to increases in property prices, which will make them less affordable. Thus, policy makers must be aware that despite their best intentions, decisions need to be feasible for investors at all strata, on a practical level.
“Imposing restrictions on the construction industry to score political points would backfire, as too hefty a price would have to be paid”
The sector is a main pillar of the country’s overall economy. It is central to the operations of business owners, factories, hotels, restaurants as well as companies utilising office space as well as residential accommodation, including those hailing from the igaming and financial services industries. Imposing restrictions on the construction industry to score political points would backfire, as too hefty a price would have to be paid, and by a swathe of our industries, not simply by the already indispensable construction, property and interiors industries. Indeed, since the 1970s, voters have historically booted out governments whenever there was a slowdown in the construction industry.
One of the organisation’s key values is constructive dialogue. The MDA holds regular discussions on policies with representatives of the Government, the Opposition as well as local authorities, in the interests of its members. We consider constructive dialogue to be the best solution. And the MDA is working hard to mitigate the challenges faced by the industry and protect its members. The Association is looking to the Government and the authorities for more certainty and fairness in the industry.
It is up to the Government of the day to change the country’s economic model, and not up to the developers. Furthermore, government must continue upgrading the national infrastructure and services, with the authorities and governmental departments striving to provide an efficient quality service, across the board. Rather than imprecisely hindering the construction industry, these are the crucial factors which will determine the country’s economic and social successes, or lack thereof.
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