One of the more common ‘table topics’ of recent years has been Malta’s ‘economic boom’, whether the growth is sustainable and what part the real estate market plays in all of this.

One of the main drivers over the years has always been our ability to attract foreign investment and tourism to the island. This success was made possible through ongoing investment by all stakeholders, both private and public, and also by way of Malta’s international position, especially being a Member State of the European Union.

Malta has numerous advantages, including its weather, safe environment, strategic location, tax system and at times its small size, which have served well, making it more flexible to adapting to international changes and becoming trendsetters. This can be noted from the introduction of gaming, DLT legislation and citizenship through the investment and residence programmes. 

What has contributed to Malta’s growth in recent years and what effect has it had on the real estate market?

In recent years, increases in tourist numbers combined with high hotel occupancy rates, have led visitors to seek an alternative and reside in private accommodation. This has supplemented the already existing short-term letting market (English language students being part of that), resulting in individuals purchasing property as an investment and to supplement their income. Accordingly, ‘buy to let’ has been a substantial driver of the growth in the real estate market these past years.

A second contributor to the growth has been the large number of expatriates relocating to Malta for work. More and more international companies are increasing their presence in Malta, both in terms of office space and number of employees, at the same time influencing both the residential and commercial rental market. Needless to say, this also had a spillover effect on other industries such as entertainment, retail and catering.

Internationally, Malta’s position has been enhanced as a result of the digital market, which has had a big effect on the internet, with social media platforms offering sharing capabilities, such as hashtags, creating new exposure opportunities for Malta.

Internationally, Malta’s position has been enhanced as a result of the digital market, which has had a big effect on the internet

Malta is also a popular destination for retirees and high-net-worth individuals (HNWI’s) looking to take up residence here. Recent developments in these sectors, namely the introduction of the Malta Individual Investor Programme and the Malta Residence and Visa Programme, have not only attracted new investment, but have also helped to put Malta ‘on the map’, which due to our size could at times be challenging.

Socio-economic forces, such as the number of separation/divorce cases, population changes, the length of time people take to buy their own properties, cohabitation and the environment, are affecting the current growth in the real estate market.

The sustainability and growth of the real estate market depends largely on supply and demand and while supply is measurable, demand is less certain. One interesting point in relation to supply is that even though it seems like we are currently living through the largest construction boom in the history of Malta, more construction permits were issued in 2006 and 2007 (individually) than in 2017. The issue following 2006 and 2007 was that at the time, the demand fell short of the supply of properties available, leading to a ‘lull’ in the market.

There is a lot to discuss on the challenges Malta is facing and what should its long-term plan be to continue to attract foreign investment. One example is the introduction of the Anti-Tax Avoidance Directive (ATAD). EU States are required to introduce anti-tax avoidance measures. Besides the ATAD directive, there are other developments taking place within the international fora and it is important that Malta is always ready to react to this changing environment to remain competitive. 

I believe Malta should retain its jurisdiction position and continue to focus on attracting (and retaining) good, substance-based business. A challenge we are experiencing is the introduction of new banking regulations. This sometimes slows down the banking process.

We have seen a lot of growth individuals relocating to Malta, which has had a direct effect on the number of properties leased and/or purchased. In order to continue attracting these individuals, Malta’s Citizenship and Residence Programmes must remain competitive. This can be done by creating more awareness about Malta and making relocating to Malta more enticing (ie: shifting the focus from people looking only at the required cost and investment of these programmes) and by improving our offerings, including entertainment (more choice and variety), high-end shopping and infrastructure.

There are other areas we should continue to focus on such as manufacturing, aviation and shipping. These industries have contributed greatly to Malta’s growth and should still be given importance.

Also, Gozo has a lot of potential, but we must create a holistic plan which ensures that the island retains its character. There has been some concern about the tunnel project. The tunnel project should be a sustainable and responsible development. Its purpose is to facilitate access… the right checks and balances should be given great importance to ensure that Gozo develops sustainably.

Michael Mercieca is a certified public accountant, specialised in both local and international taxation. He also co-founded QuickLets and Zanzi Homes (the QLZH Group), one of Malta’s leading estate agency franchising 30 offices and over 340 agents. He now forms part of the core management team at the QLZH Group and also continues his practice as an independent personal tax and relocation adviser.