Construction & Real Estate

A Changing Skyline: Malta Builds for the Future

Malta’s newest wave of construction is reflecting rapid economic growth and could lead to a radical transformation of the island in the coming years, including ambitious infrastructure projects and controversial high-rise developments.

With a booming economy demanding commercial space and a desire to attract affluent property investors, many think the time is right for a 21st century makeover of certain areas on the island. There is a lot of enthusiasm to create iconic buildings with unique design features that can cater for the needs of modern Malta. However, proposals for high-rise developments have seen a mixed response and sparked a debate about building-height limitations, Malta’s unique island character, and most of all, what the country should look like a generation from now. There is widespread agreement that Malta is at a historic tipping point in its development due to a shortage of affordable housing, an influx of people moving to Malta for work and leisure and the perception that the small Mediterranean island is running out of space.


Sarah Grech

"Malta is a safe location, everything is close by and the weather is excellent. Foreigners quickly feel comfortable because Malta is not as busy as the big city environments of London or Paris, and high-net-worth individuals enjoy a significantly higher level of anonymity than in other Mediterranean locations such as Monaco."

Sara Grech, CEO/ President of ENGEL & VÖLKERS SARA GRECH


The Accidental Millionaires

Malta has no shortage of historically distinctive buildings, and much of the century-old architecture that dates back to the time of the Knights of St John and beyond has been preserved. In modern times, Malta experienced its first building boom soon after the island gained independence from Britain in the 1960s, with the start of tourism and industrial development. Home ownerships schemes, which provided land for families to develop their homes, were introduced in the years that followed. However, it was not until the 1990s that the residential market really took off, in parallel with the economy. Home prices started to climb steadily, and many homeowners who purchased real estate with the help of government schemes actually acquired a decent net worth on the back of their investment. It was Malta’s decision to join the EU in 2004 and the Eurozone in 2008 that injected further confidence into the market. Increasing numbers of foreign buyers and a basket of tax amnesties led to an inflow of foreign investment in the property market. Prices increased up to 20% annually, showcasing the powerful potential of housing investment.

"The market for high-end real estate is actually larger than many people expect. I would say around 25% of properties in Malta are worth more than €1 million."

Fabio Zuccaro, COO of Zanzi Homes and Quicklets



A Short and Shallow Slowdown

While the onset of the global economic crisis witnessed a decline in the number of Europeans buying holiday homes, Malta’s construction and real estate sector has ridden out the economic storm better than most others in Europe. Property prices have remained largely stable, with the exception being the affordable and first-time-buyer segment. Inspired by rising prices and inflated expectations, developers overestimated the demand for this type of property. In the past two years, Malta’s economy expanded faster than many expected, and the construction and real estate sectors benefited from a growing number of foreign companies and expatriates living and working in Malta. They have absorbed much of the over-capacity and helped Malta’s rental market thrive.


Chris Agius“Our economy is growing, the property market is booming. Due to our limited land mass, more high-rise buildings will be constructed in the future. We are devising new building regulations that can better cater for health and safety issues in this new reality. We also separated the Planning Authority and the Environment and Resources Authority, which were one entity previously. I believe this is the best way to safeguard the environment and protect Malta’s heritage for future generations.”

Chris Agius, Parliamentary Secretary for Planning and the Property Market


Another Building Boom

Construction cranes towering Malta’s skyline are currently the most visible symbol of the sector’s renewed upswing. Malta’s construction and real estate industry accounts for some 10% of GDP. The construction industry is also a major employment driver, accounting for some 7% of the workforce. Because of the small size of the country, its high population density, and the decent net worth one can acquire through real estate, Malta has developed a culture of home ownership, within owner-occupancy rate of around 75%. This compares well with the EU average of 73% but is much higher than the rate in larger countries such as Germany (42%).

In terms of residential property, the industry has seen a shift to high-value lifestyle developments, providing a mix of luxury apartments, commercial outlets and leisure amenities. Demand for commercial space has led to the construction of new office blocks and the modernisation of older ones. The upgrading of the road network as well as an €80-million project to transform the historic entrance to the capital, Valletta, including the building of a new parliament, have also provided many contract opportunities. Similar projects are expected to stimulate the industry in the years ahead as infrastructural expansion is high on the agenda. Malta’s infrastructure is no longer keeping up with demand; and there have been calls for the development of an infrastructure delivery plan to ensure that the country builds and maintains the infrastructure it needs to remain competitive in the long term.


"Any developer who wants to embark on a project must make sure that project fits into the full picture. That way, it will not be discordant with the surroundings. We have to be conscious and aware of the environment and the infrastructure, but we also have to be allowed to work."

Sandro Chetcuti, President of the Malta Developers Association



Family-run Firms

Malta’s construction industry is mainly composed of small, independent, family-run operations, and dominated by a handful of large companies that often act as both developers and construction companies. Key examples of companies involved in this sector are the Tumas Group, GAP Developments and the Gasan Group. They are responsible for most signature projects on the island. The list of major construction companies includes Attard Bros, Bilom Group, Vasallo Group, AX Holdings, Rite Mix (Gatt Bros.), Blokrete and the Polidano Group. These companies all focus on residential, commercial, industrial and infrastructure construction services. Most of the activity is focused on Malta itself, but the larger operators seek strategic partnerships on international projects as well, especially in North Africa and the Mediterranean region.

In the real estate segment, the sector is dominated by a number of major players, including FrankSalt Real Estate, Dhalia and Belair, as well as international networks such as Remax and Chestertons. Real estate agency Sara Grech has joined forces with Hamburg-based Engel & Volkers. Renowned international real estate brands Sotheby’s and John Taylor have also moved into Malta servicing high-net-worth individuals seeking property.


Housing and office space demand is increasing

Price Rise

The success of the real estate industry in the late 1990s and early 2000s was once thought to be a thing of the past. However, the industry is flourishing once again, and properties are reported to be selling within 24 hours. Following a short slowdown, prices increased by 17% in 2017 according to Knight Frank’s Global House Price Index. Malta’s rental market has also exploded in recent years. According to Malta’s national statistics office, rental costs for a two-bedroomed flat went up 29% between 2012 and 2015, with popular locations and properties experiencing even higher price rises. Depending on the type of property, sales prices for residential property range between €1,500 and €8,000 per square metre. In the past, areas like Sliema and St. Julian’s were the most popular, however, real estate companies are also seeing huge potential in the South of the island as well as in Gozo. Valletta, which was once mainly the business and administrative centre of the island, has also experienced a reversal of fortunes. Recent regeneration efforts have attracted new and often affluent residents to move into Malta’s capital city. Its warm climate and relaxed Mediterranean atmosphere make Malta a top choice for people seeking to purchase property abroad. Some 5% of real estate is foreign-owned, mostly British, but Malta also attracts buyers from other European countries as well as the US and the Middle East. In recent years, the government also introduced a number of programmes, including a citizenship-by-investment and a residency-by investment programme, which have revitalised Malta’s second-home market.


Michael Falzon“Malta’s economic growth has driven up rent prices. Government is subsidising rents for low income earners but we realised that there isn’t sufficient affordable housing available. To address this situation, we already identified some 16 sites to construct over 680 new affordable housing units.”

Michael Falzon, Minister for the Family, Children’s Rights and Social Solidarity


A New Era

Since April 2016, the Planning Authority (PA) is responsible for development planning, while the protection of the environment is in the hand of the Environment and Resources Authority (ERA). The two authorities were previously operating as one entity, however they were separated for both departments to work more efficiently and to focus on their respective areas.

Both authorities are currently at the centre of proposals that would see a shift from low-rise to high-rise development. Following plans to construct several towers in different localities, including Sliema, St Julian’s and Mriehel, lobby groups are demanding the development of a nation-wide master plan, which regulates what should be built where as opposed to the current approach of approving or rejecting projects on a case by case basis. Meanwhile, the government has decided that high-rises can only be built in six specific areas. Government has also launched a master plan for the regeneration of St Julian’s main entertainment district, Paceville, however, the plan fuelled controversy and is currently being reviewed. If the decision is made to progress with these developments, the associated infrastructure surrounding it is vital, and any new plan should take into consideration how Malta’s community can absorb tall buildings in terms of transport and waste management. Sector analysts point out that high-rise developments may appear to be an obvious answer to save further land from development in areas where land is finite and a growing economy puts pressure on the existing building stock. However, they also highlight that tall buildings typically cost two to three times more than low-rise buildings per square metre of development and require higher up-front costs.


Providing Financing

Maltese developers have traditionally financed projects through the issuance of bonds and presales. It has also become common practice to build projects in phases and sell units in one phase to secure finance for the next development stage. While in many cases the developers behind the current proposals are also owners of the land, there is awareness that it is one thing to plan high-rise buildings but another one to finance them. The main banks have started showing signs of a diminishing appetite for further exponential growth in real estate exposure. In recent years, developers have already found it difficult to borrow money from the banks after the European Commission and the International Monetary Fund had issued warnings about the banks’ large exposure to the property sector. Home loans for Maltese customers, however, have not been affected.

Affordable Housing

A tax waiver scheme for first-time property buyers has also fed demand for property in the past two years. While this scheme has been extended in the 2017 Budget, it is becoming apparent that there is a shortage of affordable housing for lower-income earners, who have been priced out of the market in localities that are experiencing high demand. The government is determined to address this situation and has plans to build more social housing during this legislature, while also exploring possibilities to better regulate the rental market. Companies in Malta are also demanding more affordable office space, and there have been calls for government to get involved in this sector by developing and renting office space at favourable rates to control price inflation. While the government is already leasing out industrial space at subsidised rates and has developed a life sciences park offering laboratory space to biotech firms, particularly start-ups and microenterprises, government-owned property could become an economic tool to support the development of sustainable market rates.


Roderick Galdes

“A €53 million loan for social housing has been sealed, funding 680 housing units across Malta. The Malta Government will do its utmost to assist vulnerable families in need of affordable accommodation.”

Roderick Galdes, Parliamentary Secretary for Social Accommodation



An Opportunity to Innovate

With increased housing and office space demand, contractors are set to profit from a continuation of the robust upward trajectory of recent years. If high-rise projects go ahead, local developers will most likely bring in more foreign contractors with experience of larger-scale projects in areas such as construction methods, use of materials and site management. While Malta has some talented local architects, with many even boasting international experience, developers will inevitably need to form joint ventures to realise the projects that are currently on the drawing board. Greater exposure to foreign firms and their operations also presents an opportunity for Maltese construction firms to learn and develop. Globally, new materials, design approaches, health and safety standards, as well as advances in digital technology and big data, are creating a wave of innovation within the construction industry. Malta is also behind when it comes to the adoption of renewable energy systems and green roofs, and the coming years will see both domestic and foreign companies engage in an increasing number of projects.

Like most countries, Malta has been hit by the increasing costs of building materials over the past decades. Limestone is the only local mineral resource and is still frequently used on all types of buildings. Concrete blocks are produced locally, but most materials, such as gypsum, timber, steel, marble and granite, have to be imported, resulting in slightly higher prices. Labour costs in the industry, however, are lower than in most Western European countries. An ample pool of builders, engineers and surveyors is available, with Eastern Europe supplying many skilled and semi-skilled workers. North African and Syrian workers have also entered the labour pool in recent years.


Michael Hili

"We are seeing a growing interest in Malta from all over the world, and our warm climate, seaside properties, and widespread use of English are having a positive impact on property prices as we think they will continue to increase. Today’s property prices could look like a bargain in a couple of years’ time."

Michael Hili, Managing Director of John Taylor


Bubble Risks?

While Malta’s growing commercial and residential markets will be important contributors to the construction sector’s near to mid-term growth prospects, from a socio-economic perspective, there is fear the current development boom could lead to increased property speculation and to a bubble that can easily burst if demand falters. According to real estate agents, some 30 to 35% of tenants in Malta are working in the iGaming industry, and any regulatory changes that would make Malta less attractive could have a ripple effect on the real estate industry. Furthermore, much of the projected supply is at the higher end of the market, and, future growth will have to be driven by the high-net-worth segment. However, many believe the property market will maintain its current upward trend due to stable low-interest loans, a thriving economy and high demand as the number of foreigners coming to Malta to work and live is set to increase further in the future. Analysts also point to the rising income of the Maltese population and their desire for higher quality homes as an indicator of future demand.


 "There is a lot of pressure on the housing market in the more popular areas, and we need to ensure that the affordability is retained. There is also a considerable shortage of quality, and I mean QUALITY property, for the more discerning buyer."

Douglas Salt, Director at Frank Salt Real Estate



National Vision

The country’s vision for the future entails developing a cosmopolitan and creative environment for businesses to grow and people to live and work in. The construction and real estate sector has huge opportunities to capitalise on this vision by providing houses and offices that meet the demands of Malta’s new economy. The Maltese appear to be broadly divided about high-rise developments, and there is growing recognition that towers should not be constructed without serious consideration. While the outcome of this debate is yet to be seen, it is becoming increasingly apparent that Malta needs to speed up its decision-making process on infrastructure projects if it wants economic growth to continue, and this alone, should ensure that the prospects for the sector remain firm.


Johann Buttigieg"We are ready to support innovative ideas that can take Malta’s built environment to the next level, while respecting our centuries old heritage and environment."

Johann Buttigieg, Executive Chairman of the Planning Authority




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