It seems that the Government wants to stop the prolonged slow-down in the building industry. But with thousands of properties still lying empty throughout the islands, Kurt Sansone asks whether this is what the economy really needs.

Planning fees were cut, hotels were allowed two extra storeys, a scheme to attract foreign property buyers was re-launched and now expired permits have been renewed for a year.

These moves, part of the legacy of the Labour Government’s first 100 days, are intended to stimulate the building industry, which has suffered a decline in recent years.

Only yesterday figures released by the National Statistics Office showed that employment in construction activities declined by almost six per cent in the first three months. The decline followed a downward trend over the past five years.

A year-on-year comparison for hours worked indicated a decline of seven per cent, the same percentage drop as wages.

Residential permits also fell by more than a quarter.

The figures paint a grim picture but with successive Central Bank of Malta reports cautioning against the over-reliance of banks on property-related loans, does the Government strategy make economic sense?

While green groups oppose this strategy because it may encourage more construction and spoil the environment, economists have mixed feelings.

Lawrence Zammit, an economist, said it was wrong for the Government to pursue a path that may create a building boom when there were thousands of empty dwellings.

According to the 2005 census, there were 53,000 vacant dwellings in Malta, which were valued at €7 billion by an estate agent two years ago.

The data from the most recent census in 2011 has not yet been published but it is reasonable to expect that the number of unused buildings has gone up.

“A building boom may have repercussions on the financial sector, primarily banks,” Mr Zammit said.

However, he insisted there was a difference between the policy to extend expired permits by a year and the height relaxation for hotels.

Mr Zammit believes the allowance for hotels to build two extra storeys must not be viewed as boosting the construction industry.

“The hotels decision must be seen as a measure beneficial to tourism and not a measure to stimulate the construction sector. It will help hoteliers increase bed stock and so help them spread costs,” he said.

On similar lines was the permanent residency scheme that was re-launched last month. Mr Zammit said this measure would help put to good use empty properties that are a wasted resource.

But if the Government wanted to boost the construction sector, it had to help it diversify, he added. “It might be better to offer incentives for diversification into the renovation of empty old properties or the upgrading of empty buildings to provide better quality.”

With the Government issuing a call for expressions of interest in a cruise liner terminal in Gozo and for the re-development of the shipbuilding site in Marsa into a maritime hub, as well as showing a fondness for land reclamation, the thrust seems to be towards construction-led economic growth.

Even if this turns out not to be the case, the construction sector must not be allowed to fizzle out, according to economist Joe Vella Bonnici.

He believes that in the current economic climate there is no one solution to stimulating economic growth.

“The construction industry deserves to be supported, keeping in mind environmental safeguards, but it must not be the only stimulus,” he said.

Turning to the extension of expired permits, he said this was a way of giving developers the chance to renew their commitment to an investment that had already been approved.

On the residence scheme, he noted that although it could be seen as helping the property sector it will also encourage foreigners to live here and create economic spin-offs in other sectors.

Mr Vella Bonnici said it was important to stimulate economic growth, especially since Brussels had initiated an Excessive Deficit Procedure after Malta exceeded the three per cent GDP-to-deficit ratio.

Although Malta’s economic output has out-performed many eurozone countries, economists believe it is still not enough to continue creating jobs and sustain the social safety net for the long term.

What part the construction industry will play in upping the gear of economic activity depends on whether it will be the central plank of the Government’s economic policy... and on this the jury is still out.

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