Property oversupply only a risk if all construction projects implemented at once, study finds

 

The study was an update to an earlier exercise conducted by KPMG analysing the local construction industry

Malta Developers Association president Sandro Chetucti
Malta Developers Association president Sandro Chetucti
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An updated KPMG study on Malta’s construction industry has found that the risk of oversupply in the sector would only materialise if all planned development comes to fruition at once.

Back in 2017, the initial study made by the auditing company had concluded that there was no construction bubble, and that there was no sufficient evidence suggesting that an increase in property prices wasn’t being matched by an increase in demand.

Speaking at a press conference announcing the results of the update, Malta Developers Association boss Sandro Chetcuti said the latest study concluded there would be potential risks only if all the current planned developments be presented to the market all at once, which Chetcuti said would contribute to oversupply.

“We’re not driving a small car anymore. We are now driving a Formula One car—the economy is soaring and the risks are high—and if we take our hands off the steering wheel for a second, all the hard work would be for naught,” Chetcuti said.

According to the update, the construction industry still contributes to 14% of all Gross Value Added with the sector employing over 37,000 employees - a 9% increase from 2015.

The industry generates €2.56 billion annually, an increase from €2.3 billion in registered in 2015.

“The update shows that the construction industry is still the backbone of this economy and that it has a multiplier effect on other industries. But, to be fair, there has been diversified growth in all sectors,” Chetcuti said.

KPMG Head of Advisory, David Pace, said that apartments contributed to more than 50% of all dwellings in the country, adding that there was a shift towards more expensive areas in recent years, and higher-quality dwellings.

“Still, even when we apply price adjustment factors, the Housing Affordability Index shows that apartments became less affordable by 13%,” Pace said.

Prime Minister Joseph Muscat, who also addressed the conference, said that he was pleased with this update while stressing the need for decisions about the sector to be based on facts rather than assumptions.

“Despite these studies, however, and despite our discussions on property, it’s only the perception out there that seems to matter,” he said.

“This study continues to show that if the economy wants to keep moving forward, we need to keep building, and we need to keep employing workers. There is no viable substitute for an industry that spurs the economy in this way,” Muscat concluded.

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