Developers and contractors, who often overlap in dual functions, are getting very vocal about their situation. They have found a good way to do that. They bandied together in an association and persuaded Michael Falzon to head it. He is an architect by profession, so he knows the sector inside out. In addition he was a minister, holding several portfolios, one of which included the sector.

Mr Falzon set up Mepa, upon which the property sector is so dependent, and which has been the subject of many critical views and outright complaints.

Mepa underwent a restructuring in recent months. It was given a new political master, updated statutory arrangements, a new functional set-up and a change of personnel, including a chief executive officer who was formerly the organisation’s main legal advisor, meaning he knows it intimately.

Mepa was also given a new fees structure, thereby to try to meet the Treasury’s objective of making it self-sustaining. Whether or when that will come about, is another matter.

One of the main criticisms levelled at Mepa and the government is that the fees are too high and are serving to discourage new applications. To such an extent, it was suggested, that the government will still have to subsidise its operations to a considerable extent.

Michael Falzon is losing no opportunity to highlight the development construction sector’s problems, and to do so with facts and figures pertinent to the issue, as befits somebody with his grasp of the affairs in question. His style is pungent, but not such to give an excuse to ignore what he is saying.

And what he and the developers are saying is that the sector is passing through a very severe slowdown, which Mepa’s bureaucratic procedures are not helping, despite hopes to the contrary once the regulations and set-up were reviewed. No one can deny that there is a slowdown.

The data gathered by the National Statistics Office confirm it. A fortnight ago the NSO published GDP provisional figures for the first quarter of the year. The news release indicated that during the period under review GDP (measured under the expenditure approach) in real terms increased by 3.3 per cent.

That is a good rate, though Malta needs to increase at a faster rate if it is to make up for the meagre growth registered between 2000 and 2009, as discussed in a study by Prof. Joseph Falzon referred to in this column a week ago. While overall the economy grew, gross fixed capital formation declined by 12.5 per cent in real terms.

That confirms a very substantial downturn in property development, which underpins gross fixed capital formation, confirming what Michael Falzon has been saying on behalf of developers and contractors. In fact the NSO time series brings out clearly the fact that the problems of the sector started quite a while back.

Continuing to measure the data in real terms (constant prices) the NSO shows that gross fixed capital formation shrank sharply in 2008. It fell from €1,020.7million in 2007, to €760.1million the following year (in part probably influenced by the Mater Dei project). It dropped further, to €621.1million in 2009. There was marginal year-to-year recovery in 2010. But, at €690.3 million gross fixed capital formation was still as much as a third below its level in 2007.

Small wonder, then, that employment in the sector is stagnant and declining. All that said the state of the property development and construction industry has to be seen in context. It is a glaring fact that Malta has an overhang of unutilised property. The forthcoming census of the population could well show that the overhang has risen very sharply since the last count. (It was estimated at 80,000 units in a recent contribution to this newspaper.)

In other words Malta has an inventory problem, of the type which caused turmoil in the Irish and Spanish economies. So far, that kind of turmoil has mercifully stayed away from the Maltese economy. But strains are evident. For one thing, many transactions within the property sector and between developers and building contractors had been taking place to a considerable extent on a barter basis.

That is practically impossible nowadays, leaving many developers and contractors struggling for liquidity. Then there is bank lending, which is very substantial, as also observed by the International Monetary Fund on more than one occasion.

The banks have not been caught napping in that regard, in contrast to the banks in Ireland, for example. Since the problems of Bical and the National Bank Group our banks have learned to be very wary over their lending. Bank of Valletta and HSBC Malta have certainly been that, and are careful to make prudent specific and general provisions (as I still call them) against their property portfolios.

It is not the case that the government has directed Mepa to cool property development as a matter of policy. What is happening is haphazard, more due to accident than thought. That is not the way to move forward. The situation has to be reviewed holistically and in context. The fact that there is a massive overhang does not mean that permits should take ages to issue. Nor should it mean that, because developers and contractors face problems, permits for more ghost buildings should be issued.

As always, a balance needs to be found, without delay.