Many actors in the speculative building sector have been rubbishing warnings about an overpriced property scenario, in their drive to support further expansion in luxury villas, hotels, shopping malls and commercial property.
There are no indications of a bubble, with some metrics even suggesting that prices may be slightly undervalued. Contrast this with strong drivers which give rise to such euphoria namely a robust economic growth: GDP ~3.5-4% expected in 2026, combined with bumper tourism arrivals, more foreign low-cost workers/migration, combined with affordable national debt levels. In Q4 2025, the nationwide property price index rose to 6.1% year-on-year (about 3.6% inflation-adjusted), continuing a trend of 5-7% annual nominal increases in recent years.
Naturally, as land is scarce, most argue that the current trend of building higher units will beat the incidence of a drop in demand and a consequent slide in property prices. The other side of the coin is bank financing. Local banks are also gingerly financing mega developments on the understanding that consultants indicate no evidence of an approaching property bubble which can burst leaving a significant correction in resale prices. On a social aspect, aid promised to first-time property buyers by the Nationalist Party (if elected at the May election) will cost an average of €37 million per year.
It presented calculations showing that the pledges would cost €10.5 million to implement in 2027, with that figure rising every year. By 2035, the aid will escalate to €60.5 million per annum. The prospects for Malta's domestic property market in 2026 remain positive overall, with steady price growth driven by strong demand, but it remains challenging for first-time buyers due to affordability pressures. Government is trying to fight a commonly held view that property prices are unscalable for low-income cohorts by having the Housing Authority, via a restructured Malita Investments building social/affordable units planned for completion by 2027, with EIB financing.
A novel equity-sharing scheme (offered by the Housing Authority) introduced upfront deposit requirements. These focus on a minimum 10% cash deposit paid by the applicant, combined with the buyer funding at least 50% of the property value overall (via deposit + bank loan), while the Housing Authority co-owns up to 50% (capped at €100,000). Equity-sharing is ideal if you have some savings for the 10% yet struggle with loan size due to age/income. Yet first-time buyers are still facing an insurmountable escalation in prices.
For a basic apartment without a garage; this has shot up in value, depending on location, to reach €410,000, unfurnished. One-car garage with services can easily reach €55,000. All the same, it is a fact that elevated exposure to house loans (mortgages) and mega property development is becoming a prominent component of local bank loan portfolios. Observers frequently ask whether an assessment is being made by ERA and PA to arrive at the true reckoning of demand for luxury villas/apartments and commercial properties, while mega developers continue applying for new permits. The latter's ambition is exemplified by the image of a property baron jumping on the gravy train - making hay while the sun shines. Will future demand hit a slowdown given the low fertility rate and an aging population which, does not augur for developing more expensive units. If an epiphany occurs this oversupply can lead to a slowdown in construction activity and negatively impact employment within the sector.
It is encouraging to note that 80% of residents own (or are in a mortgage) over their property but there is an emerging trend that more are resorting to rent, due to the escalation in housing stock values. It stands to reason, homeowners may feel less wealthy if property values decline, potentially leading to reduced consumer spending and a mild economic slowdown. Let us review some of the mega developments, which have recently been approved by the PA and ERA.
The list is long, and not exhaustive. Here, one can mention the massive Villa Rosa project (under review by court) and the ITS site project, run by DB Investments in St George's Bay; the Xuereb Tower and Mercury Towers in St Julian's; 1,000 new flats and conversion of Fort Chambray in Gozo; Town Square in Sliema; the Metropolis and the ST Tower in Gżira; the Shoreline in SmartCity; 20 flats and garages in the buffer zone of Ggantija Temples, the delayed Mistra Village development and the massive Quad business hub in Mrieħel.
Naturally, this list excludes many projects still under application, which will be approved by the end of this year. Again, is Indis Malta taking into account the potential future availability of vacant industrial space as robots and AI-driven mechanisation replace traditional manufacturing methods? Recently, top estate agents were surreptitiously noticing the amount of office space on the market has exceeded demand, and as a result, rents are falling. Add to this conundrum, the direct investment by Castille in its own grandeur projects.
A resounding example is a large, shell form showroom in the south periphery zone of Zejtun, rented by the government for a fixed term at an aggregate value of €25 million. This property saw the housing of several government-controlled agencies such as Finance Malta, Gaming Malta, the Companies house, plus a top audio and fully functional hall - ideal for regular public meetings. This shell form property cost another €11.5 million to refurbish. Notice how an estimated 94% of buildings were built before the introduction of the Technical Guidance: Minimum Requirement for Energy Performance in Buildings.
It is not all doom and gloom since there are a few small buildings of low energy, low carbon or award-winning structures of repute but there is no visible introduction of widespread "green building standards" as in most EU countries. Pity the Low Carbon Strategy, issued by the current administration in 2017, which stated that "low carbon development and investment are needed in areas where there is potential for decreasing carbon and where diversification is possible".
The low-carbon building technology regulations identified for implementation do not appear to be a top priority for the construction industry, especially in light of recent fatal accidents linked to poorly supervised and substandard workmanship.
George M. Mangion is a senior partner at PKF Malta