Buy-to-rent is today’s real estate market buzzword. The buy-to-rent sector has increased tenfold in the last couple of years and indications are showing that this trend will continue throughout the coming year.

The property market is undergoing many changes and, one can argue too many, in such a short span of time. Is this sustainable? It definitely is, at least for the foreseeable future. However, the risks of excess stock in the years to come could be a cause for concern, unless something is done to address it.

So, is it a good time to invest in the Maltese property market? The straightforward answer is yes. However, one must tread carefully and resort to good advice. As I write, the landscape of the real estate market is changing and what used to work until a few years ago is today unsuitable.

Up to a few years ago we used to promote Malta as a place where to buy a holiday home away from home. We used to promote Malta as a country that offers sun and sea all the year round, a country where one can take refuge from the cold winter months of northern Europe. We also used to participate in a number of overseas fairs such as ‘Holiday homes in the Sun’ or ‘Places in the Sun’.

Ten years ago such marketing efforts used to work and brought many good investments to the country, especially from Scandinavia, but this kind of marketing is today dated. Given the great economic strides this country has gone through, sun and sea and holiday homes are no longer on the radar.

Today our efforts are directed more at foreigners seeking to invest in Malta, foreigners looking to take up residency in Malta on account of their job, or high net-worth individuals seeking to take up citizenship by investment. Today we promote Malta as a place that offers good employment and investment prospects, excellent education and hospital facilities, an English-speaking community, a unique lifestyle and fine weather all the year round.

This is bearing fruit and it is what has brought about this sudden surge in the local real estate market. As Malta’s economy booms, so does the market. The evolution of new economies such as remote gaming, financial services and, to a lesser extent, ship and aircraft registration has brought to Malta many foreigners with their families seeking to buy and rent properties. The demand at the moment is so high that it can hardly be met, especially when it comes to high-end properties. Local developers have seen this lacuna and are addressing it with multi-million developments projects that address such a clientele.

The buy-to-rent sector has increased tenfold in the last couple of years

However for this sector to remain sustainable, not only do we need to provide high end accommodation, but also a high-end environment where high net-worth investors can feel at home. For this sector to continue to thrive we need to attract more high-street brands that appeal to affluent investors. We need to provide more five-star dining experiences or a Michelin type of restaurant. Together with this, we need to provide good infrastructure and an efficient road network. This is exactly what Malta lacks and what our country needs to embark on to ensure the sustainability of this sector.

Another concern is that given all the projects earmarked for completion in the coming five years, the amount of stock is going to increase substantially, with the risk of oversupply. In this scenario the country needs to be more aggressive in its marketing drive to promote more investment to our country.

We need to be more innovative to attract other industries and have a spread so that if one industry fails others can make up for the low returns.

This brings me to my original point on buying to rent, on whether this is the time to invest in such properties and the considerations to make when buying a property for rental.

First and foremost is the location, as this will determine the kind of client you can attract. If you are aiming for a high return you will need to invest in properties situated in a tourist destination, such as Portomaso, Sliema, St Julian’s or Swieqi. Here one can expect clients who are affluent and who will be looking for certain luxuries. Properties in these areas can be rented out to both tourists for short lets or individuals in the remote gaming or financial services sector. If you are, on the other hand, looking for long lets with a lower but steady return, the inner harbour area also offers great opportunities for investment.

In the property market we are now witnessing a merge of the real estate and tourist markets. Developers are today building apartments that can be used for Airbnb purposes. Although the management of Airbnb properties is more taxing, the returns are much higher and average 12 per cent compared with the average six per cent for normal rental.

So if you are looking for an investment with a solid return, given today’s market conditions, buying to rent is definitely a good option. However, before delving into any investment, always seek the advice of a good property consultant or financial intermediary who can guide you on the proper steps to be undertaken before taking the plunge.

Chris Grech is chairman, Dhalia Real Estate Services.