I’m coming to you on location from the island of Malta. This small island country joined the European Union back in 2004.
Since then it has seen tremendous population growth as the open borders of Europe has allowed the free movement of people.
Malta has always been a natural hub for relocation. Ever since the 1994 Malta Permanent Residence Scheme and more recently the renewed schemes, Global Residence Programme and the Malta Residence Regulations 2014, the country has seen a steady interest in purchasing real estate in Malta as one of the criteria to obtain the residency status.
By 2014, the number of properties in the country exceeded the local population by 65,000 units. In the past few years that excess has been absorbed, and the entire island is undergoing an unprecedented construction boom. There are construction cranes everywhere.
One of the drivers for immigration has been the rules in Malta which permits businesses which operate in the online gambling arena. These gaming companies are everywhere and real estate agents report that 30% of tenants looking for rental accommodations are employees in the gaming industry.
Rental rates have increased about 40% over the past 5 years. Some rental apartments that opened with starting rents of 600 Euros a month only a few years ago are now charging 1000 Euros a month. Some tenants have seen increases of 200 Euros a month in a single year.
The country’s lower cost structure has attracted retirees from all over Europe, including the ultra wealthy.
Malta offers an advantageous tax structure for those who have large capital gains and the island offers greater anonymity than, say Monaco.
Depending on the investment one takes, cap rates range between 4%-7% and according to the folks at Remax and historical capital appreciation has been between 2% and 6%.
Home ownership rate in the country is 81.9% which is high by global standards.
The current construction industry accounts for 7% of the economic activity in the country. In historical terms, that’s a very high percentage for any market.
In my estimation, the market will reach a point in the near future where the market will appear overbuilt. In the high summer season, short term rentals are numerous and the nightly rates rival hotel rates. But in the low season, vacancies can be extremely high and number in the tens of thousands.
Malta recorded a government budget surplus of 76.5m Euros in May of 2019.
The government debt to GDP ratio was at 50% a couple of years ago. Today the debt to GDP ratio is at 46%. This compares with over 100% of GDP in the US.
Tourism is one of the main drivers of the economy and makes up 16% of the country’s GDP.
Tourist Arrivals in Malta increased to 250,000 in April, 2019.
Considering that Malta’s permanent population is 433,000, a monthly tourism arrival rate of 244,000 is significant. If you consider that the island is a top destination for cruise ships in the Mediterranean, about 35,000 of the visitors come by ship and stay less than one day. The remainder stay longer with more than half staying a week or longer.