Valletta 2018 and the run-up to the European Capital of Culture year led to an estimated €167 million in public and private investment in the capital, according to a new study.

But while investment rose dramatically since the title was announced in 2013, the Valletta 2018-commissioned study also pinpointed another trend: homes being sold off to become commercial establishments, the large part tourist-focused, lending credence to residents’ fears over the change in the city’s social fabric.

The Investment Survey, carried out by researchers at the Economic Policy Department of the Finance Ministry, aimed to quantify the magnitude of investment and the extent of development in Valletta across different sectors.

Nearly half of the €167 million investment it found was in cultural heritage, including the Valletta 2018 flagship projects: the art museum Muża, the Valletta Design Cluster at the Old Civil Abattoir, and works at Strait Street.

Another €20 million were spent on squares and gardens such as Tritons’ Square, Castille Square and the recently inaugurated Ġnien Laparelli.

The major spin-off of this investment was in hospitality services: more than a fifth of all investment – around €35 million – was in hotels, restaurants and bars, which is more than was invested in homes, offices and retail outlets combined.

As a result, employment in the Valletta hospitality sector rose by 62% between 2012 and 2018, compared to just 19 per cent across the whole of Malta. The growth was equivalent to 250 additional jobs in Valletta.

Moreover, the study estimated that this investment added €72 million in economic activity – €89 million in nominal GDP – and generated around 153 full-time jobs in the construction sector.

While construction was a major winner out of the sky-high investment, even larger benefits were reaped by the IT and communications industries, while the sales, art and heritage and machinery and equipment industries also experienced significant positive impacts.

However, the study authors do acknowledge that not all these impacts can be directly traced to Valletta 2018: for a start, the study assumes the investment in cultural heritage would not have taken place regardless, which the authors say “is not necessarily completely true though it is reasonable to assume that it is true to a large extent”.

They also accept that other factors, such as the 2017 EU Presidency, could have impacted the capital in the same time period, and that Valletta 2018 also had an effect on the rest of the country, meaning a straight comparison between Valletta and the rest of Malta could be less than perfect.

“There are no perfect experiments in real life and the following results should thus be considered indicative,” they acknowledge.

Graphics: Design Studio

Homes become hotels

The number of residential permits issued for Valletta doubled between 2012 and 2017, although this was far lower than the rate of growth in the rest of the country, “possibly indicative of planning constraints in Valletta as a world heritage site”, according to the study.

At the same time, demand – as measured by contracts of sale negotiated in Valletta – far outstripped the rest of the country, and prices similarly rose quicker than elsewhere around Malta.

However, when it came to commercial properties, there was no such price spike, despite a substantial increase in demand that was stronger than in the rest of Malta.

The authors suggest that this is “probably due to an overall shift in residential properties converted into commercial properties, particularly in the accommodation sector”.

This trend is particularly noteworthy. Other research commissioned by the Valletta 2018 Foundation, an anthropological study, found widespread complaints among residents that the capital was being “depopulated” even as more boutique hotels and commercial establishments opened.