Construction sector increasingly showing signs of plateau, industry players claim

The construction sector is increasingly showing signs that it has reached a plateau.

According to an analysis by the Central Bank which requested feedback from industry players, there is a widespread view that the construction market “may have reached its peak, with limited opportunities for further expansion.”

The report mentions Malta’s limited land leading to high land prices as a contributing factor.

While investment activity has remained stable and sometimes increased throughout recent years, the report noted that this is largely attributed to capital expenditure in investments such as machinery.

The Central Bank stated that respondents within the construction industry continue to report considerable cost pressures from shortages in construction material and supply chain disruptions among others. This, along with “an increasingly burdensome regulatory environment,” has resulted in compressed profit margins.

Despite the replies respondents gave the Central Bank, MataToday reported that 2025 saw the approval of 12,325 residential units, the third-highest annual total ever, while approvals on ODZ land more than doubled to a record 226 units.

The figures represent a 41% increase over units approved the previous year, signalling a sharp resurgence in residential development.

According to the Central Bank report, respondents claimed that increased public and regulatory scrutiny contributed to “a more cautious approach to permit issuance.”

The report also includes replies from questions sent to players in the real estate sector. 

Respondents say that business activity within this sector remained buoyant as the residential sale and rental markets continued to perform particularly well, “supported by resilient demand, while supply constraints contributed to sustained increases in both property prices and rents.”

Real estate players reported a shift toward a buyer-driven sector marked by longer negotiation processes as buyers take their time before purchasing property.

“Growth in transaction activity also slowed due to higher property prices and mismatches between sellers’ price expectations and buyers’ budgets,” the report notes.

Respondents also noted that buyers’ choices depended more on their income rather than preferences. The Central Bank’s report mentions a “widening imbalance in the rental and sales markets,” as demand began to outpace supply.

Commenting on the fact that properties in central Malta are the most sought-after, real estate players believed that the prices in certain areas have risen beyond what is justified by the quality of the property.

When it comes to commercial property, demand for office space remains weak due to hybrid work arrangements and an oversupply of office spaces. 

“By contrast, demand for warehouses and garages strengthened, with garage prices rising, particularly for street level units.”