Issue link: https://maltatoday.uberflip.com/i/1405706
standards. ey stress that it is important to understand that efforts to increase quality and minimise inconvenience to the general public require significant investment and come at a substantial cost. Unless all industry operators are consistently held to the same high standard, the market will continue to reward those who cut corners in the interest of keeping prices low. Malta is in urgent need of a highly detailed, holistic plan- ning exercise to limit urban sprawl, moving away from mi- cro permitting to macro planning. Proper planning must start from a long-term socio-economic vision for the na- tion. Such a vision can allow the country to plan for the types of industries it wishes to attract, and in turn for the type of residential and commercial properties it needs to have in its pipeline. In other words, decisions on how to allocate land, and what sort of construction should be per- mitted, can follow as a logical consequence from such a long-term vision. The construction and property markets are crucial to Malta's GVA and GDP. Are these percentages sustainable in the long run? Or will we reach a saturation point in the near future? Here, it is pertinent to define what we mean by 'sustain- able' . From a gross value added perspective, one can note that the percentage of GVA generated from the construc- tion and property industry has been relatively stable over the years, increasing in line with total GVA (save for 2020, which was an exceptional year) and hovering around the 10-11% mark. Another important fact to note is that al- though gross value added is intrinsically linked to construc- tion volume, the value of construction can increase faster than volume if there is higher quality construction (requir- ing better skilled workers, and more expensive materials and equipment). However, if we focus on the volume of construction, then that is a different matter. e physical limits of the island mean that there is indeed a saturation point – Malta can support a finite population and a finite number of proper- ties. is does not mean that when this point is reached, the industry will vanish, as there is always a need for the regeneration of old buildings, and for smarter planning and building of properties which can support higher levels of economic activity with a smaller footprint, thus impinging less on the natural environment. What are the main challenges faced by the construction industry today? e full effects of the COVID-19 pandemic are perhaps yet to be felt by the construction and property industry. Over the course of the pandemic, several businesses dis- covered that remote working was a viable option for them and their staff. It remains to be seen if remote working practices will become the norm in a post-pandemic world. So far, it appears likely that many businesses may adopt hy- brid work policies. is may lead to changes in demand for both commercial and residential property. e construction and property industry is also impacted by the overall performance of the rest of the economy. Case in point is the impact which the financial services and ig- aming industries have had on demand for residential and commercial property. e reputational damage suffered by Malta in recent years, potentially exacerbated by the grey-listing, has cast a cloud over prospects for future in- vestment in the short-term, though it might be too early to tell whether the impacts will prove to be significant in this regard. A major cause of concern for many industry stakeholders is the declining number of Maltese people working within the industry. is has resulted in a less stable workforce, and the loss of several traditional skills. Industry operators acknowledge that this is in part due to improvements in education and work opportunities, allowing today's youths to choose careers which are well paid and less physically demanding. Nevertheless, there is a need to attract a new generation of skilled workers to this industry. How many people are employed in the construction industry directly? Can you provide statistics on nationality, age, salary of workers? How many other jobs benefit indirectly? e broader construction and property industry directly employs around 25,500 FTEs. Statistics regarding national- ity and age of employees are not available; however, through discussions with industry operators it would appear that a substantial proportion of employees are foreign nationals. As mentioned previously, the decreasing number of local workers in the industry is a major cause of concern for in- dustry operators. Indirect and induced employment supported by the in- dustry amount to around 15,200 FTEs. ese are estimates calculated through the use of employment multipliers which can give an indication of the number of jobs which are supported indirectly by a particular industry. In terms of salaries, it should be noted that compensation paid to workers varies substantially depending upon their specific role and skill level, with skilled employees capable of earning substantially more than unskilled workers. Our esti- mates of average compensation are limited to the construc- tion of buildings sector (which is just one facet of the indus- try), and amounted to around €16,500 per year during 2020. With regards to construction, what are the main characteristics of local design? Is locally-quarried stone still popular, or are people moving away to cheaper alternatives? rough our discussions with industry operators it emerg- es that the use of concrete bricks is today more common than the use of local quarried stone. e reason for this is however not always a matter of cost. Several operators have suggested that the diminishing number of local workers in the industry is leading to the loss of several skills, includ- ing the ability to properly work with local stone. Concrete bricks are often simply an easier material to work with. The rental market took a severe hit with the onset of COVID-19. What are the forecast for the rental market returning to pre-Covid levels? As suggested, the pandemic has had a significant impact on the rental market. is was due to two factors - first- ly a large number of foreign nationals left Malta either in order to join their families while still working remotely from another country, or due to the closure of their place of employment. e second factor was the almost com- plete shutdown in tourism, which resulted in a substantial number of properties usually catering to the short-term letting market being shifted to the long-term market. e resultant mixture of reduced demand and increased sup- ply caused a substantial decline in rental rates, with some industry insiders quoting declines of up to 40%. It is likely that this situation would improve as restrictions on travel and economic activity are lifted. Our expectations are that tourism should eventually return to pre-pandemic levels, and demand for accommodation by foreign nationals will continue to increase as the economy recovers. Given the unpredictable nature of the pandemic, it would be pre- sumptuous for anybody to suggest when this may occur with any degree of certainty. Many Maltese remain firmly in favour of buying property, rather than renting. And the mortgage market in fact remains strong, even amid the pandemic. Nevertheless, some argue that the choices and opportunities for first-time buyers are diminishing and many young adults no longer afford a mortgage. Are you seeing any signs at all of shifting towards rental? It is no secret that property prices have been increasing at a faster rate than incomes for a long time. As such, the af- fordability of property is a constant challenge. Affordability issues does not necessarily translate to diminishing (or lack of ) access to property for first-time buyers – though it is a real struggle for low income earners – but it translates to compromise. Over the years, we have seen a shift towards more affordable areas, smaller footprints, and a prevalence of apartments which remain the most affordable type of property. On the rental market, there is a dearth of data, and here I invite the reader to have a look at the first edition of the Annual Malta Residential Rental Study which pre- sents some interesting facts on the rental market – around 14% of registered rental contracts with the Housing Au- thority were agreed with Maltese individuals. It is difficult to predict whether one would expect a shift from home ownership to renting since home ownership is deeply in- grained in our culture, even if it would make financial sense to rent over buying property. With regards to property sales, which localities are the most sought after? What do buyers look for most: is it location, size, property type, level of finish, etc? What is the median price of property purchased in 2020? Over the years we have consistently found that demand is driven primarily by location and property size. With regard to location, despite Malta being a small island, many buyers still favour the Northern Harbour and Central areas of the island, with less demand directed at the periphery. is is evident by looking at the price per square metre for various regions and localities. For instance, the average asking price for a finished apartment in the North Harbour area is in the region of EUR 2,900 per sqm. is can be contrasted to EUR 1,900 per sqm in the Southern part of the island. It should be noted that one impact of the pandemic was an increase in demand for properties in more rural locations, and for properties with some degree of outdoor space. According to our database of properties, the median ask- ing price for an apartment in 2020 was around €265,000. Malta is in urgent need of a highly detailed, holistic planning exercise to limit urban sprawl, moving away from micro permitting to macro planning. Proper planning must start from a long-term socio-economic vision for the nation 7 29 AUGUST 2021