Malta’s buoyant economy of the past few years, motivated by an influx of foreign investment and a focus on the servicing sectors, has pushed the need for more real estate, encouraging demand, which, in turn, accelerated the creation of supply.
As a result, the sector experienced an annual growth rate of 5.3 per cent, while employment grew at a rate of 9.4 per cent, according to figures by the National Statistics Office and Jobsplus.
Sale and rent prices increased multi-fold, while contractors, developers and those working in the building industry focused their attention on meeting the needs of an inflated market, which had ballooned, much to the chagrin of the average man and woman in the street.
For, as construction sites continued to bore the island, Maltese citizens had to deal with daily inconveniences – and, in some cases, wholesale destruction of their peace, and homes. For some time, it has been clear that change is necessary.
“I’m a strong believer that every market regulates itself and that there has to be little intervention, for the dynamics of supply and demand cater for themselves. But I think that in recent years we’ve had an exaggerated inflation,” Benjamin Grech, Chief Executive Officer of Engel & Völkers says in a frank interview where he does not mince his words on the changes he deems necessary for a better built environment.
“For a while, we were able to ride this wave of inflated market prices,” he continues, explaining that, preCOVID-19, the average rental price – according to Engel & Völkers statistics – was approximately €900 per month, increasing every year by €50 to €100 per annum. “On average, sale and rental prices were being advertised 20 to 30 per cent higher than market value, though the posted rates would not reflect the actual selling price, which would stabilise down to what the property was actually worth,” he explains.
However, COVID-19 has upended the status quo and thrown any projected future growth into doubt. As a result of the pandemic, Mr Grech asserts, the long-let market has seen an influx of 9,000 properties which would usually be sold as short-let leases. The resulting over-supply has resulted in a 30 per cent reduction in long-let prices, the CEO says, quoting figures collected by his firm, which has also seen an 80 to 90 per cent reduction in the number of promises of sale, recently.
“These are numbers that people may not tend to speak about, out of concern that they will damage the market. But I’m a believer that transparency will allow it to correct itself and become more sustainable and healthier in the long run – without any huge fluctuations in prices.”
Nevertheless, he thinks the pandemic is a game-changer.
“As a country and as an industry, we have important decisions to make. We must not get the market to recover as quickly as possible, but we must make sure it is resilient for the future.
“Now we have the chance to emphasise the need for long-term sustainability, as well as quality and innovation in building regulations, and to tidy up the entire sales process, making everything less bureaucratic,” he asserts.
For, according to Mr Grech, change was desperately needed even prior to the onset of the coronavirus crisis.
“I was involved in the Economic Vision paper [prepared by the Malta Chamber of Commerce, Enterprise and Industry] and our main principles were always centred around the need for a more sustainable built environment,” he says.
But what does that look like? Mr Grech points to a number of operational and regulatory adjustments which would make for more aesthetically pleasing – and less disruptive – streetscapes. First is the necessity for contractors, rather than the commissioned architects, to take responsibility for the build, with the creation of a licence or registry which would log any works being done.
“Along with this there needs to be a set of building regulations,” Mr Grech says, stressing that the central question everyone should be asking is: what is the minimum standard of what should be built? “Whenever we talk about regulations, people think we want to restrict them from earning money,” the CEO adds.
By way of example, he points to the initial resistance to the new rental laws specifying that rental properties need to be registered with the Housing Authority. “But we are now beginning to see the positive effects. In fact, since this January, 10,000 properties have been registered with the Housing Authority.
If we need to regulate then we should, and we’ll start to see the improvements. It doesn’t mean that we’ll get it right the first time, but we should have a starting point.” Such changes need to be shorn of any excessive bureaucracy, the CEO reiterates, and there needs to be an emphasis placed on transparency, which should even be applied to the entire sales process and the valuation of property.
Indeed, Mr Grech is very critical of the current systems, saying that the authorities have a tendency to keep information to themselves – to the detriment of all parties in the sector. “A lot of the time, developers want to sell properties at higher prices because they are unable to buy a piece of land at the right price.
Today, what is the market value of a particular piece of land? We don’t know. Is Government prepared to share contractual details to do with the sale of land to the private sector? No. In Malta everything is hugged tight to the chest. Nobody wants to share, even if this transparency can result in a better market value,” he asserts.
But Mr Grech is not an armchair critic. Rather, he is putting his time where his mouth is – by leading the Malta Chamber’s new Building and Construction Industry Committee, which aims to create an awareness about the importance of the sector and lobby for essential shifts in procedures, operations and mentalities.
“My relationship with The Malta Chamber and the new committee is to look at the entire sector and see where the weakest links are,” he explains, describing the 12-strong team as “diverse” with lawyers, business contractors, developers, an interior designer and an estate agent serving as members. “What we all share is the want and the motivation to improve the quality of the sector,” he affirms.
So far, they’ve had two Zoom meetings, but the pandemic has slowed things down a bit. Nevertheless, Mr Grech’s proactive stance means plans are afoot to, in his words, “get things going”. Indeed, the team is, at the moment, “aligning our vision of what we want to achieve, and we’re analysing the recent report of the Kamra Tal-Periti (KTP) to see how we can add more value. While not meeting all together has been a bit more challenging, the meetings we have had have been very productive,” he adds.
This is an extract of an interview which first appeared in the June/July edition of the Commercial Courier