Permits for the construction of new residential buildings plummeted by 37.2 per cent last year over 2019, statistics compiled by the Central Bank show.
In its annual report and economic analysis for 2020, the Central Bank noted that the number of permits issued for the construction of residential dwellings and commercial buildings declined “significantly” from the record highs of 2018 and 2019, but remained slightly above their historic average.
Malta was hit by an economic slowdown due to the COVID-19 pandemic last year, resulting in the economy contracting by seven per cent.
In its analysis of the construction sector during the virus outbreak, the Central Bank said 7,873 permits for residential dwellings were issued, down from 12,485 permits in 2019.
Even though the number of permits issued last year plunged by 37.2 per cent, residential construction permits were still slightly higher than the historical average of around 7,000 per year.
The decrease in residential permits during 2020 was registered across all property types. However, in absolute terms, most of the decline in permits issued last year was driven by apartments.
In absolute terms, most of the decline in permits issued in 2020 was driven by apartments
Apartments accounted for 85.9 per cent of total residential permits last year.
Permits for maisonettes and terraced houses accounted for 9.3 per cent and 3.8 per cent per cent. Permits issued for other dwellings continued to account for a very small proportion of all residential permits issued.
The number of development permits for commercial buildings declined by 22.7 per cent in 2020, following an increase of 1.3 per cent in the preceding year.
In 2020, the Central Bank said that 2,687 commercial permits were issued, which is lower than the 3,474 approved in 2019. The number of commercial permits thus fell slightly below its historical average of around 2,730 permits per annum.
The Central Bank said national accounts data also indicated moderating activity in construction, with the annual rate of growth for the amount contributed to the economy (gross value added) slowing to 2.9 per cent in 2020, down from 13.7 per cent in 2019.
However, the Central Bank cited Jobsplus data showing that in the first 10 months of 2020, there was a rise in full-time employment in the construction industry when compared to the corresponding period last year, with job creation driven entirely by the private sector.
Residential property prices up at slower rate
Residential property prices continued to increase during the first three quarters of last year.
Citing Eurostat’s property price index, which is based on actual transactions involving apartments, maisonettes and terraced houses, the Central Bank said prices increased at an average annual rate of 3.9 per cent during the first nine months of 2020.
This was “significantly lower” than the 6.1 per cent recorded in 2019 as a whole, the Central Bank observed.
House price inflation was lower here than the euro area, where it averaged five per cent in the first three quarters of last year.
The Central Bank observed that property prices continued to be supported various factors, including low interest rates and various government schemes.
“Nonetheless, growth in house prices was less dynamic than before the pandemic, reflecting less favourable developments in households’ income and lower demand for private rental accommodation given the uncertain outlook for the tourism industry,” the Central Bank said.