Malta will need to invest around €1.7 billion in its real estate sector over the next 15 years to achieve key climate targets that will see the quality of property take a leap forward, according to Gordon Cordina, a prominent economist currently serving as Chairman of BOV, Malta’s largest bank.
Speaking during a conference organised by the bank titled Climate Challenges and Opportunities for Real Estate: Time for Action, Dr Cordina laid out the main issues, solutions, costs and gains at the intersection of climate change requirements and the property industry.
Describing it as a topic that is “not just important but essential to the continued survival of our respective economic and social interests,” he said a strong degree of collaboration and partnership between critical institutions and the entities involved is required to effectively transform the challenges in this area into potential opportunities.
Despite the scale of the challenge, Dr Cordina stressed that overcoming it is “always possible as long as there is good will from all parties to step back from certain practices which can be detrimental and move towards a new common understanding.”
Addressing attendees directly involved in the sector, he noted that demand, particularly driven by foreign buyers, is developing with an emphasis on quality and energy efficiency.
“If we want to sell our products, we must meet the patterns of demand as they are developing in the future,” he said. “We cannot avoid having this quality upgrade in our real estate product if we want to continue being competitive.”
He suggested that “in developing real estate in a smarter and more efficient way, we are also looking at financial gains from energy and water savings, and efficient waste management, the economic benefits from the creation of green jobs, and better quality real estate towards wellbeing and competitiveness.”
Getting into the particular, Dr Cordina noted that average energy consumption stands at around 5,500kwh per household per year, and estimated that a reduction of 1,000 to 1,500kwh per year could be achievable.
Climate targets, he pointed out, require such savings to be made by 40,000 to 60,000 new and renovated household units over the next 10 to 15 years.
Meanwhile, the average household produces around 1.5 tonnes of mixed waste per year, with separated waste hardly making up 10 per cent of this figure.
“This proportion,” he said, “needs to be reversed by 2040.”
Dr Cordina additionally noted that Malta currently ranks 31st out of 150 countries in the CEO World Quality of Life index, and proposed that a transformation in real estate could turn Malta into a quality proposition to halt a degradation in its competitiveness and become a regional hub of choice for business.
Turning to the costs and gains, the economist shared his calculations that climate proofing expenditure on real estate has the potential to reach a total of around €1.7bn over next 10 to 15 years. This involves an increased sale of around €150m annually, profits of around €20m, and the creation of 1,700 jobs directly and 2,850 jobs considering multiplier effects.
“So,” he told attendees, “the prospects aren’t bad, but the question is, as always, who will pay?”
He estimated that energy savings (at current prices) over a 20-year period following the investment would amount to €800m to €1bn – “not enough to cover the total investment costs”.
Other elements, he said, must be recovered from Government, the real estate occupier, and industry, “by inculcating better quality in real estate, making improved efficiency in development and management essential”.
Over 20 years, savings from the cost of household waste management through separation at source was estimated at €300-400 million, while rax revenues from the creation of green jobs could bring in around €150-200 million.
This arrives at a total of €1.3-1.5 billion – with the remaining amount of the forecast €1.7 billion investment coming from higher real estate prices and efficiency gains in real estate development.
“We must be ready to pay a little more for our houses, for increased quality,” said Dr Cordina. “It is a question of getting all actors to realise there are gains for everybody.”
He expressed his view that a “strong element of Government and regulatory intervention is required to make all this happen” and stressed the need for mechanisms through which Government passes savings from energy, water and waste management and tax revenues to households and businesses making green investments.
Financial institutions also have a role to play by enabling investment to take place effectively by valorising the benefits enjoyed in the future: “Financial institutions must increase mechanisms to provide resources to fund the necessary investments, which are eventually repaid through gains realised.”
“The arithmetic seems right. The players are here,” he said.
“Now we need a good dose of goodwill and the optimism to believe we can overcome the current challenges.”