Are we killing the golden goose via higher building costs, bureaucracy and regulatory zest
However, the supply of affordable housing options (such as social housing) has often struggled to keep pace with this demand, leading to a situation where many first-time buyers find it challenging to enter the market
by George M. Mangion
The situation in Malta's construction sector, reflects a complex interplay of factors affecting demand for new projects, despite the overall resilience in property sales and letting. During the past decade, we witnessed an increase in the number of expatriates and professionals relocating to Malta for work or lifestyle reasons. This has contributed to improved demand for both sales and rentals.
With hindsight, we recall how Castille tells its party faithful that since 2013, the island has seen a significant influx of foreign buyers, attracted by favourable tax regime, citizenship-by-investment programs, residency permits and a stable political environment. This demand has bolstered property sales, particularly in the luxury segment. Again, one factor that attracted “Nomads” post COVID-19 pandemic was an accelerated trend of remote work, leading many individuals and families to seek properties in more desirable locations.
Malta's appealing lifestyle, climate, and quality of life have made it an attractive option for remote workers and expatriates. Real estate in Malta is often viewed as a stable investment mainly due to a potential for capital appreciation and rental income. These factors have attracted both local and international investors, contributing to robust property sales and letting activity.
Thank Heavens, our GDP has exploded and more than doubled since the Labour party won the election in 2013. These factors have created a dynamic property market in Malta, characterized by strong sales and letting activity despite challenges in the construction sector. As the tourism industry started in a modest way during the sixties, yet over the years, we never looked back since arrivals continued to increase due to smart advertising by AirMalta airline and global advertising by MTA. In 2025, post-pandemic, there is renewed interest in short-term rental properties.
Many investors have turned to the letting market, capitalizing on the demand for vacation rentals, which has boosted the overall property market. As a bolt in a clear sky, fresh challenges faced the construction industry amid a general decline in business sentiment across the board. Let us try to understand the challenges. The construction industry may now face stringent regulations and permitting processes that can slow down the initiation of new projects.
Changes in zoning laws or environmental regulations can also impact the feasibility of new developments. Concerns about destroying the heritage and sometimes the natural habitat has incensed several protest groups to challenge and try to revoke building permits. A tightening of regulatory standards in the construction sector in the wake of the Jean Paul Sofia building collapse fatality has introduced new rules, like licensing for contractors and builders.
Nobody, can deny, that notwithstanding Covid lull, sales and letting may be strong, yet broader economic conditions such as inflation, interest rates, and economic uncertainty can lead to cautious investment in new construction projects. Developers may be hesitant to commit to new projects if they perceive economic instability. Prices of labour, raw material and building regulations have gone up, thus hindering cash flow for developers.
The types of properties in demand may be shifting, with a greater focus on sustainability and energy efficiency. Developers may need to adapt their projects to meet these new Green ecological rules, which can take time and resources. The construction sector may also be facing labour shortages, (such issues have pushed government to issue a tougher migratory policy to protect rights of TCN’s, making it difficult to scale up new projects. A lack of skilled labour, can lead to delays and increased costs, further discouraging new developments. Still, given a relatively high rate of GDP growth this has helped estate agents and developers to scale upwards in their ambitious plans.
A recent survey conducted by the Central Bank found that construction firms were more likely to report profit declines in 2023 and 2024 because of cost hikes. These costs have “increased considerably” and hence firms that were unable to raise prices for their services experienced lower profits. Sadly, the report found that business sentiment towards commercial activity in the last quarter of 2024 reached its lowest levels since 2021. By contrast, real estate firms broadly reported stable profits in both years as costs did not change significantly, according to this recent report. It reported, the least favourable outlook in terms of future business activity.
Concurrently, The Malta Development Association, a construction lobby, recently stated that demand for property was “constantly increasing” and to keep the wheels well oiled it recommended that regulators may consider how to address bureaucracy issues. Certainly, banks form a substantial pillar in the firmament that finances home mortgages and investment in new commercial property. Banks, often tailor certain products and services to meet the needs of homeowners. Various government initiatives and incentives are aimed at stimulating the property market, such as reduced stamp duty rates and tax incentives for first-time buyers.
Ideally, there are key features and options that first-time buyers (the latter, are given an annual bonus of €1,000 for ten years by the Housing Authority). Applicants may be eligible for high loan-to-value (LTV) ratios, often up to 80% or 90%, depending on the bank and the borrower's financial profile. This means that residents may only need to provide a smaller deposit when purchasing property. Many international banks operating in Malta also offer mortgage products for expatriates, providing additional options for financing property purchases. In summary, while there may be a perception of a glut in certain segments of the property market, particularly in luxury developments, the availability of affordable housing for first-time buyers remains a significant challenge.
The government and developers are continually working to address these issues, but the balance between supply and demand for first-time buyer properties is an ongoing concern. In some areas, there may be an oversupply of certain types of properties, particularly luxury apartments or high-end tower developments. Critics point out to a perception of a glut in certain segments of the property market, particularly in luxury developments, but the availability of affordable housing for first-time buyers remains a significant challenge.
The government and developers are continually working to address these issues, yet the balance between supply and demand for first-time buyer properties is an ongoing concern. There has been strong demand for properties among first-time buyers in Malta, particularly in urban areas and popular locations. However, the supply of affordable housing options (such as social housing) has often struggled to keep pace with this demand, leading to a situation where many first-time buyers find it challenging to enter the market.
