Many people have been monitoring the present construction boom that is happening now in our country, signs of a healthy economy. Projects are being sold out before they even have their planning permits issued, properties sold on plan are being resold two or three times before their delivery date. The country is at full employment, everyone is very busy, employers have difficulty to find employees, and the expat community is growing. All these factors are creating a positive ripple effect on our country and the trend seems to be persisting. Economic numbers speak for themselves and the rhythm the country is in at the moment shows no signs of abating. Properties in certain areas have more than doubled in the past three years, and all of a sudden this was a wake-up call for people who stood on the side-lines whilst watching others create wealth.

Is this another gold rush? Will the property boom lead us to a bubble? Many people who are not in the game have been prophesizing the downfall of the property market. But in reality, the property market in Malta has been passing through a long consolidation between 2007 and 2013, and it is only in the last three years that the Maltese investor took courage to buy with the intention to resell or rent. Those who bought three years ago in the expat-friendly areas from Msida to Swieqi have doubled their monies easily, or are receiving high yield rentals exceeding 10%, apart from unrealized capital gains.

The market is still flourishing and booming, both with the local money of those who are in the game, who are reinvesting their profits in new properties, and also with the influx of foreign investments from businessman who benefit from Malta’s favourable tax regime, many of whom are choosing to reinvest their dividends in our country.

Malta’s banks are full of liquidity, and one can be convinced of the strength of the economy because people are using their own savings to buy property. Today is very difficult to get a loan to buy a second or third property compared with pre-2008 when banks tightened their lending policies as they were too exposed in real estate. Salaries have been increasing at a rapid pace and the house affordability ratio is still realistic. When the average home is over 10x the average income, the market will start showing signs of overheating, however when C-level salaries are exceeding €100k+, properties as expensive as €500,000 still look affordable for them. In general, wages and salaries are rising at a very fast rate, and so will house prices continue to increase as long as Malta remains in full-employment. And Malta’s investors are economically strong, the Maltese has a buy and hold mentality, so when the buck stops some day in the distant future, we will still have a soft landing, and only those who are way overexposed will suffer. Indeed, from 2000 to 2007 the real estate index in Malta rose 80%, and from the peak to trough in 2009 the index only dipped 8% nearly keeping all those gains from the investors of the 2000s. In the consolidation period, the market consolidated sideways. Since 2013, the market went up around 30%, and if history repeats itself, the index needs to rise another 40%+ from present levels to stay in line with present historical growth rates.

It is fascinating to say that the Maltese real estate market tends to mirror the UK Halifax House Price Index, but lags slightly as the UK market is marginally stronger. Whilst the UK based index has yielded approximately 6% cumulative rate of return since 1983[1], the CBM Property Prices Index gave a cumulative 5% return since 2000[2]. So think of renting a property and getting another 5% return, the returns from property investment in Malta have been tremendously outstanding.

I believe that investing in property in Malta (buying your own home or to speculate or buy and hold) remains the best alternative to put in your hard earned money. If Malta wants to move up the ladder and compete for more international funds to flow to us, it is ripe time to start a number of Real Estate Investments Trusts (REITs), so that the public and foreign investors can invest smaller amounts of money and still benefit from the yields such investments give. Projects will be better presented and better funded because REITs will invest in the contractor who needs to be accountable and deliver to the highest standards. Contractors can be better financed and buy bigger lands and create better landscaped projects to entertain the environmentalists’ requests. Furthermore, the projects will be promoted internationally to give our country even more exposure.

International clients have been observing the construction boom occurring in Malta and this caught everyone by surprise however now Malta must organise itself better and build in a more organised fashion. The authorities should respect target approval dates without postponing, contractors should share resources between each other and also bring over foreign workforce. They should also ideally work projects in tandem or with a pre-defined timeline because apart from their buildings, the government has embarked on plenty infrastructural projects and all these factors are contributing to delays which might make foreigner investors question our country’s ability to finish projects on time and thus lose faith in future projects.

I beg to differ on those who portray a gloomy outlook on our economy or the real estate sector in Malta because facts speak for themselves and I am a strong believer that the trend a favourable one. For those who haven’t yet invested, now is the time to get in before it’s too late, and capitalise on the boom that has just started. For those in it, it’s time to step up and double your initial investment and hold tight and adopt a Buffett mentality. “Our favourite holding period is forever” – Warren Buffett, 1988.

Adrian Sciberras, FCCA, MIA, CPA, Chairman of the Business Concept International plc is a certified public accountant and entrepreneur. Business Concept International plc focuses on running, transforming and building mature business companies rooted in multiple sectors, mainly being corporate services, accounting, auditing, administration, marketing, human resources, real estate services and property management. Business Concept International and its affiliated companies are dedicated in providing tailor-made solutions for our clients, leading to long-term business relationships and taking advantage of the numerous referrals from satisfied clients. The group includes notable names such as Fairwinds Management Limited, Incorporate in Malta, Accounting Services Ltd and Chestertons Central.

[1] HALIFAX HOUSE PRICE INDEX www.halifax.co.uk/house-price-index
[2] PROPERTY PRICES INDEX (BASED ON ADVERTISED PRICES) www.centralbankmalta.org/site/excel/statistics/house_prices.xls