Malta’s virgin land may finally be getting some respite as a result of a stagnant property market and the rising cost of building permits, with a 40 per cent drop seen in the number of planning applications submitted during the first part of this year.

Between 500 and 575 applications were received in the first seven months of the past three years, or an average of 540. But the same figure in 2011 has slid to 320, a drop of 40 per cent, according to planning authority statistics.

What’s more, these statistics do not account for what is known as validated applications: permit requests that go through a preliminary screening and are approved for processing. The drop here is from an average of 516 applications in the first seven months of 2008-2010 to just 124 up to July this year – 76 per cent down.

On one hand, the figures confirm the negative trend in the property market but, on the other, indicate that the reformed planning system and the higher fees that came with it have had a significant impact, stakeholders agree.

Planning applications represent Mepa’s biggest income stream. The situation, according to Malta Developers Association president Michael Falzon, is leading to a vicious circle, where the planning authority, rather than becoming self-sufficient as promised in the reform, would end up costing taxpayers more.

He hinges his argument on information given recently in Parliament, which shows that, in the eight months up to May, the government subvention to the Malta Environment and Planning Authority amounted to €7 million, exceeding the authority’s annual subvention in the past.

Mr Falzon acknowledged that the downturn in property has had a key impact but insisted the fees and the bureaucracy brought about by the reform amplified this trend.

“Yes, developers are being more cautious, especially the ones who may have unsold projects on their hands and have the banks leaning on them. However, this is a multifaceted problem.”

Mepa CEO Ian Stafrace conceded that the fees were likely to have had an effect. But he said a preliminary analysis of the data showed a significant number of applications fell through because Mepa had been giving applicants clear indications that their requests were non-starters, for instance.

“Under the previous system, these people would have submitted their application and then been told a year later, after the whole planning process, that it could not be accepted. Now they are being told after the preliminary screening, which was introduced with the reform launched in January,” he said.

Mr Falzon is unconvinced by this argument, pointing instead to fees and the bureaucracy applicants face before the application proper can even start being processed.

However, an analysis of the statistics carried out by Mepa bears out Mr Stafrace’s argument. In some 45 per cent of cases screened during the period under review, applicants were told their request was either unacceptable in principle or did not conform to a major planning policy.

Mr Stafrace did concede to Mr Falzon’s argument about bureaucracy. He said in the first months after January planning officers were asking for too much information, making the preliminary screening more bureaucratic than it had to be.

“Naturally, there was also a learning curve the authority had to go through after the reform. We have now streamlined the process and we intend to tweak it further in the future,” he said.

He also accepts that the new fees could have taken their toll. “This is precisely why we are carrying out a detailed analysis of the situation. We promised before the reform that we would take stock after six months and that is what we are now doing.”

The data, he insisted, showed that the issue required careful analysis, not only at face value but through qualitative probing. “For instance, we are consulting some of the applicants who chose not to proceed with an application after screening to understand their individual reasons.”

The statistics are not bad news for everyone. Astrid Vella from Flimkien għal Ambjent Aħjar actually welcomed the drop in applications. “It had to come about because the country could not continue to add to the stock of vacant properties at the rate it had been.”

She argued that, along with the environmental impact and the side effects of overdevelopment on tourism, the development glut had the potential to do economic damage, as pointed out recently by the Central Bank, which warned that banks were facing heightened credit risks in view of the declining property market.

However, Ms Vella echoed Mr Falzon’s call for a reform of the fee structure. “We would like to see fees re-engineered to incentivise the restoration of urban area properties in a way that would regenerate the cores of our villages, rather than build on virgin land or raising tall modern buildings in the midst of our urban cores,” she said.

Even the Chamber of Architects president Vincent Cassar agreed with this, arguing that the re-evaluation of the fees could have a positive effect on planning.

However, he also pointed to a third explanation for the dwindling number of planning applications, which was that banks were being stricter with developers, expecting them to shoulder a larger portion of an investment and putting in place more onerous conditions generally.

Whatever the reasons for the drop, he called for a debate about the matter among stakeholders.

“I think we need to sit down and discuss the situation because the building industry is an important industry on which many trades depend.”