The intersection of real estate investment and sustainable practices, highlighting the growing importance of ESG (environmental, social and governance) considerations in the industry, were some of the topics that were discussed during a Real Talk debate with politicians, real estate experts and industry leaders last month.

The event, held at the Eden Cinemas in St Julian’s, formed part of RE/MAX Malta’s commitment to encourage a debate on the future of Malta’s thriving real estate industry.

During the debate, the panel made up of Bank of Valletta CEO Kenneth Farrugia, the chairman of the Malta Developers Association (MDA), Michael Stivala, the chairperson of the Vassallo Group, Natalie Briffa Farrugia, RE/MAX chairman Kevin Buttigieg and architect and property valuer Justin Mizzi delved into topics such as the development of the industry and the much-needed restructuring, financing, green building certifications and renewable energy adoption.

They also discussed the impacts of the industry on society and how these factors are transforming the way one thinks about properties, from design and construction to energy efficiency, waste management and community engagement. The panel was moderated by Hailey Still, RE/MAX Europe, and Joseph P. Theuma, COO RE/MAX, Malta.

‘The future is green’

The Real Talk debate kicked off with a keynote address by the Minister for Public Works and Planning, Stefan Zrinzo Azzopardi. He said that one needs to understand the importance of the real estate sector yet take stock of the current situation.

“We need to appreciate the successes that the sector and all participants and operators have managed to acquire in Malta and Gozo. But we need to understand that the formula that potentially has given us so much success has to be analysed, evaluated and possibly rethought in view of what lies in the future.”

He said that many people in Malta have their lifetime savings invested in property. So, the government must find the right economic solutions and the right economic models to protect these savings, as well as give new opportunities to attract even new investment, as well as new opportunities in order that this sector continues to flourish.

“This sector cannot be taken or considered in a vacuum. The real estate sector has to be aligned with the requirements of the country, with the future planning that the country is undertaking, as well as the new realities that need to be implemented in order to see that we remain in line, not only with European regulation, but also with the new trends that the future brings.

“The future is green. We have to look at the subject of sustainability in relation to how this sector will progress, but we cannot just look at sustainability only from a regulatory point of view. We also need to understand the trends, the demands, the characteristics of the country and how we need to continue to address the requirements in relation to real estate.”

Recently, the Building and Construction Authority published a draft document that stipulates the standards that have to be followed in relation to sustainability in buildings.

“We are currently having a public consultation in relation to what is being asked and requested into building designs in relation to the new buildings that we will have soon. As a country, together with the rest of the European Union, we are on a collective journey in relation to the decarbonisation of our economy, and we cannot underestimate the importance of the implementation of all these initiatives that we need to undertake in order to reach this goal.”

He said that the discussion in relation to sustainability, however,  should not just be limited to the regulatory aspect of energy efficiency and buildings, but it should “also serve as a basis for a discussion on how we will provide, better and higher quality buildings”.

‘Excessive bureaucracy’

In reply to the moderator’s question to what led to the increase of 16% of promise of sale agreements, which amounts to just under €450 million, which is 25% over last year’s value, while, on the other hand, deeds of sale were down by 13.7%, MDA chairman Michael Stivala said that this is not related to just one factor.

Stivala pointed out that in May 2023, the promise of sales were not just 25% better than the previous year, but the best month ever recorded except from December 2021, which was the month when the COVID incentives expired.

Stivala said that growth in promise of sales is indicative of the growth in the industry. However, he stressed that the real estate sector must continue pushing as an industry to offer professional service, to make sure that “the biggest investment of most of the individuals is done in a correct and professional way”.

Estate agents have a very important role, he said.

Real estate sector has to be aligned with the requirements of the country

Stivala added that many developers have outgrown their business model, so they are not structured for the projects they are undertaking. In this context, the MDA is educating and encouraging developers to programme development better and make sure they can deliver on time, as otherwise this would reflect badly on the whole industry.

He highlighted another factor which makes a developer’s life more complicated: the “excessive bureaucracy”. The association is constantly pushing the government to reduce the different levels of bureaucracy. He also said that banks and notaries are also engaged in complicated processes, where the client is always on the losing end.

“We are giving a bad name to our industry. As the service provider, as developer, as contractor, we have failed our clients. As a result, industry needs to review the whole process from the beginning to the end, to make sure it is more efficient and that we deliver what we promise to our clients.”

Taking on from where Stivala left off, Natalie Briffa Farrugia said that the industry must tackle sustainability before it is too late.

“Given the climate changes we are experiencing, our buildings need to be more sustainable. However, this must be a collective effort. Nobody can do this alone. It is too complex and sometimes it can become overwhelming. But if we work together with the banks, the developers, investors, architects, we can create energy efficient and sustainable buildings that go a long way towards offering better value for money.”

Close collaboration

In his intervention, RE/MAX chairman Kevin Buttigieg said that industry players need to cooperate to offer a better product.

“We need to deliver a better product to the end client, who is the most important person at the end of the chain. Most buyers are putting their money in the biggest investment of their life and the industry cannot afford to fail them. The industry needs to adhere to deadlines to make the process as problem free as possible.”

He noted that to initiate these changes, it may be necessary to consider implementing certain penalties, which however could potentially introduce additional bureaucratic processes.

Therefore, Buttigieg said it is crucial for all stakeholders to come together, collaborate and actively work towards a common goal.

“Although this may require some time and concerted effort, if the industry players genuinely commit themselves to the cause and prioritise it without delay, we can collectively achieve significant improvements. I firmly believe that we have the capability to bring about positive change and deliver an outstanding outcome.”

Speaking about the increases in rental prices, Buttigieg said that the rentals market has grown exponentially. Over the last four or five years, prices have shot up due to a number of factors, including a higher demand from foreign labourers, apartment sharing and the foreign investment schemes.

As regards property prices, architect Justin Mizzi said that today’s price index shows that property prices in Malta tend to double every 12 years or so, meaning an average growth of 6%. He explained that there are many reasons for this.

“The main reasons why property is a good investment all over the world is because property is something tangible. It also means that banks can secure it and finance it. The main thing is we need property no matter what. People need property to live, work and play.”

He said there that stakeholders must focus on various factors to keep those 6% long-term average growths, including eliminating bureaucracy, improving the level of service, the quality and infrastructure.

Striving for ‘better quality’

In his address, BOV CEO Kenneth Farrugia said that it is great to see different stakeholders were agreeing on the importance of quality, service and green initiatives.

“Building better quality dwellings strengthens the overall proposition. And banks will be important catalysts to change behaviours in more ways than one. Pricing will be one of them, because banks are making it more attractive for people to go green. Why? Because the greenification of the economy needs to be financed. It is more expensive to go green but, in the longer term, it’s beneficial for society.”

He said that this is not about residential apartments only but extends to commercial office space as well, and noted that today employers need to be flexible and offer work-from-home solutions, but mentoring and coaching staff cannot be done remotely.

“Bank of Valletta employs 2,100 people and most of them want to be in an office and they want to be in a quality office. So, the word ‘quality’ needs to drive us all collectively. But more than that, it elevates the value proposition of the country.”

Farrugia highlighted that foreign direct investment is very important for the country and that quality can make or break a decision for investments.

“We need to think national, not just parochial. So, the impact on contractors, on developers, the way they develop properties, their responsibility towards neighbours, towards the society as a whole, is very important,” he said.

Real Talk came to an end with an opportunity for those present to ask questions to the panel members. This part of the debate proved to be highly engaging and thought-provoking, showcasing the interest and commitment of the audience towards sustainable real estate practices.

The questions raised during this session touched upon a wide range of topics, including green financing options, community involvement, technological advancements and regulatory frameworks.

RE/MAX admits that the journey towards sustainable real estate may require overcoming challenges and navigating through complex dynamics. However, the commitment and collaboration demonstrated by the participants proved that the country is moving in the right direction.

The real estate agency says that the sector has a tremendous opportunity to become a catalyst for positive transformation and a model for sustainable development.