A key industry in Malta where sustainability should play a crucial role is the building industry, including the construction and real estate sectors that it encompasses. These sectors are essential to our well-being and standard of living. In 2022, both sectors comprised 7.1 per cent of the total gross value added (GVA) for Malta, which speaks to their importance from an economic perspective.

In November, KPMG held a national conference entitled ‘Malta’s Property Market Outlook: Trends and Expectations’ in collaboration with the Malta Developers Association (MDA) and Property Malta. Here we shared the results of the second edition of KPMG’s report on sustainability in construction and real estate, building on the first one we conducted in 2022.

This year’s report had the aim of gaining further insights of consumer preferences on sustainability in real estate within the Maltese context, and of gaining insight on the role of financial services to enable the transition of the sector towards sustainability. The full report is available from the KPMG website.

Buyer perspectives on sustainability 

The study evaluated the relative importance of various factors, such as location, size and layout, quality of build and others, for respondents who purchased property between 2021 and 2023.

Location remains the most important factor, with sustainability ranking in sixth place for the second year in a row, suggesting that a pressing need for sustainability to become embedded within the building industry. Location is also a key consideration for renters, with 97 per cent picking it as the first of three key considerations when choosing which property to rent (aside from price).

Nevertheless, at the individual building level, 99 per cent of prospective buyers ­identify at least one sustainability feature, such as solar panels, low energy consumption or proximity to outdoor natural spaces, to be moderately to extremely important in their choice of property. Indeed, proximity to outdoor natural spaces or the availability of green spaces within the building itself is considered to be the most important sustainability feature, being ranked as moderately to extremely important by 88 per cent of prospective buyers. 

Although sustainability does not necessarily translate into higher costs, our study found that around half of buyers and renters are willing to pay more for sustainable property. Prospective buyers were willing to pay an average of €32,000 more, while 60 per cent of those renters who are willing to pay more indicated that they would be willing to pay a median value of €50 more monthly.

Financial services as enablers of sustainability

More than half of prospective buyers said they plan to finance their home purchase through a loan. Unsurprisingly, when asked about the factors influencing their choice of bank, 55 per cent of prospective buyers ranked the loan amount offered first followed by the cost of the loan in second place. Interestingly, sustainable incentives, such as the availability of green loans, came in third place for respondents’ choice of bank.

Around half of buyers and renters are willing to pay more for sustainable property

The importance given to incentives for financing sustainable property indicates the growing importance of banks in financing the transition of the sector towards sustainability. Despite this, 68 per cent of prospective buyers indicated that they are unaware of any banks in Malta that are actively incorporating and promoting sustainable initiatives.

Transforming the building industry towards sustainability

When asked to what extent the construction sector in Malta is taking initiatives towards sustainability, respondents gave the construction industry an average score of 1.9 on a scale from 0 to 10, with 84 per cent of all respondents giving the industry a score below 5.

Indeed, when asked what more stakeholders could be doing on sustainability, respondents suggested that the transformation of the sector towards sustainability should be championed through five main enablers, including regulation and enforcement, education and awareness, improving affordability (such as through incentives), safeguarding heritage and ensuring health and safety.  Such enablers require action by various key stakeholders.

Most respondents indicated that the government and regulators play an extremely important role in transforming the construction sector towards sustainability. Building professionals, developers and suppliers of building materials and systems followed closely.

Banks and insurance companies surpassed homeowners and real estate agents, reinforcing the view that the financial sector has an increasingly vital role to play in the sustainability transition of the sector, and the building industry at large.

We consider that stakeholders in the building industry must come together to find sustainable solutions. The industry requires a holistic vision – a strategy that looks to embed sustainability principles across the industry’s core operations and allows it to elevate itself to a higher standard while adapting to the demands of a constantly evolving socio-economic framework.

Rachel Decelis is associate director, ESG, (racheldecelis@kpmg.com.mt) and Steve Stivala is director, Advisory Services (stevestivala@kpmg.com.mt) at KPMG in Malta.