An analysis published in the Central Bank of Malta’s latest Business Dialogue found that construction activity appears to have reached a plateau, but real estate agents and businesses serving the construction industry continue to report stronger activity, including record sales in some cases.

The analysis draws on 141 responses from construction and real estate companies collected since 2022, split relatively evenly between the two industries.

“The construction sector is increasingly showing signs that the sector reached a plateau,” the Central Bank said, adding that there is a widespread view among businesses that the market may have reached its peak, leaving fewer opportunities for further expansion.

One of the main constraints is the limited availability of land for new development, which has also contributed to elevated land prices. Some contractors reported that their order books are increasingly being sustained by ongoing, long-term projects rather than new developments.

However, the plateau in construction does not mean investment has stalled. Investment activity has generally remained stable over the period and has increased in some cases, although spending has often shifted towards machinery and other capital expenditure rather than new property development.

Only around eight per cent of construction companies surveyed since 2022 reported investing in new property development projects.

The latest quarterly data also indicate that businesses in the broader construction and real estate sector remain willing to invest. In the second quarter of 2026, 56 per cent of firms contacted planned to increase investment, up from 25 per cent in the previous quarter, while 11 per cent planned to invest less.

Planned investments include major developments, property refurbishments and business expansion, while several firms are also investing in artificial intelligence and other technologies intended to improve efficiency.

Real estate businesses report stronger activity

The experience of real estate businesses has been considerably stronger.

While construction firms generally reported stable conditions, companies providing services to the industry saw a more pronounced improvement in activity. Real estate businesses have also tended to be more positive than construction companies, with some reporting record sales.

Both residential sales and rentals have performed particularly well over recent years, supported by resilient demand. At the same time, constrained supply has contributed to sustained increases in property prices and rents.

Demand remains broad-based across Malta, although central areas continue to be particularly sought after. The Bank found that available supply has increasingly struggled to keep pace with demand in both the sales and rental markets.

The second quarter of 2026 was also particularly positive for the sector. Some 67 per cent of construction and real estate respondents said business conditions had improved over the previous three months, compared with 25 per cent in the first quarter. Eleven per cent reported a deterioration, while 22 per cent said conditions were unchanged.

Looking ahead, two-thirds of firms in the sector expected business activity to improve further over the coming months, while none expected it to worsen.

There are, however, signs that the residential market itself is evolving.

Higher property prices have contributed to slower growth in transaction activity, while differences between sellers’ expectations and buyers’ budgets have become more apparent. Negotiations are taking longer as buyers spend more time making purchasing decisions.

The bank said buyers’ choices are also increasingly determined by income rather than preferred location or property type. Nevertheless, it stressed that interest in property remains strong.

For construction businesses in particular, the operating environment remains challenging.

Material shortages, supply-chain disruption and volatile input prices have put pressure on costs and, in some instances, profit margins. Businesses have also described the regulatory environment as more bureaucratic, costly and time-consuming.