Malta is seeking safe passage through the EU crisis by encouraging new industries and wealthy property buyers.
For years, Malta has punched well above its weight. With a population of only 413,000 people, it has its own armed forces, embassies across the world, an impressive education system and a thriving tourist industry. Now, however, the country is seeking a safe economic passage through the EU’s current recession, and it aims to do this by encouraging new industries and wealthy property buyers.
These are not hollow aspirations: in the past year Malta has introduced tax legislation designed to attract international high-fliers. Last January, there was the introduction of the Highly Qualified Persons Rules, which aim to bolster the financial services industry and stipulate that incomers in a range of executive positions in financial services will pay tax at a rate of only 15 per cent, provided they have an income of at least €75,000 a year for five consecutive years.
Then, in September, came the New High Net Worth Individuals Scheme, which is designed to encourage people to contribute to the island’s economy, not simply keep a holiday home there. The applicant must live in Malta for at least 90 days a year and buy property there worth at least €400,000 (or spend €20,000 a year in rent). If these conditions are met then foreign income will be taxed at 15 per cent. The minimum tax payable is €20,000 a year and €2,500 per dependent.
“This makes living on Malta a very attractive proposition, especially when you consider that our residency conditions are straightforward and there is no inheritance tax or capital gains tax on a primary residence,” says John Huber, a tax adviser on the island.
The thought of the super-rich choosing to live on this tiny island, still best known as a cheap and cheerful holiday resort, at first sounds unlikely. And the initial sight of box-like housing scarred by satellite dishes as you drive from the airport to the north coast is less than promising. It is only when you see the island’s capital, Valletta, with its mixture of baroque and Renaissance palaces, that you begin to sense Malta’s architectural splendour.
Most people live in satellite towns around Valletta, in bustling tourist areas such as Sliema and St Julian’s. Space is at a premium but apartment developments are sprouting up along the harbour. Tigne Point occupies the prime site overlooking the Grand Harbour at Sliema. A contemporary take on a traditional Arabian street design, the complex features flat-roofed homes built around a marble piazza and shopping centre. There is a restaurant adjacent to a sea-water infinity pool, and the views across the bay towards Valletta are impressive. Prices range from €210,000 to €2m and roughly half the properties are being sold to locals.
“That is important because we do not want to create a resort-style development, solely dependent on the fluctuations in overseas economies,” says James Vassallo, the sales and marketing manager behind the project.
Midi, the developers of Tigne Point, have an even more ambitious project: a marina village of 400 apartments and houses on Manoel Island, in the middle of the harbour. The first homes should be ready by 2015.
Yet there is a drawback to living in Sliema and Valletta. Malta has the fifth highest car ownership per person in the world, with two cars for every household. Tigne Point residents can use their underground car park but heavy traffic prompts many people to buy outside the area.
Madliena, slightly further around the coast, is a favourite spot among international buyers. There are few amenities in the Madliena Village development, which comprises an assortment of stand-alone, modern houses, rather like Britain’s Sandbanks in Dorset. But access to international schools is straightforward and Sliema is a 10-minute drive away. These homes cost between €1.5m and €2.5m and they can be let for up to €8,000 a month.
However, even at these prices you get little in the way of a garden and grounds along the coast. Malta is the most densely populated country in the EU with, on average, 1,265 people per sq km. Those in need of extra space should look at one of the inland villages, such as Gharghur, Naxxar or Lija. Although some of these villages’ outskirts are marred by advertising hoardings and ugly developments, there is character in their charming squares with street markets, cafés and bars. The winding streets leading off the squares tend to be shaded by tall, anonymous looking buildings. Behind these front doors are some of the island’s most impressive homes. They are the palazzos, with their inner courtyards and wells – a hangover from the 16th century, when every home had to be capable of withstanding attack and siege.
Prices for a palazzo start at €850,000. If you need more land, drive across the threadbare roads deeper into the hinterland where farmhouses can be good value. Belair Real Estate are selling a modernised €1.95m farmhouse with 2,000 sq m of landscaped grounds, a swimming pool and guest chalet.
Socially, Malta has changed beyond recognition since the days when tourists filled the Jolly Jack Tar bars that remained from its time as a military base. Those cheap drinking dens are now expensive restaurants, and Malta has become a stop-off point for super-yachts. Whether there is enough entertainment for the super-rich remains to be seen – there is only one decent golf club on the island and the nightlife hardly sparkles.
Still, the lifestyle suits Andrew Barrett, 45, who looked into several of the world’s more glamorous destinations before deciding to move to Malta with his wife six months ago. “You get more top quality real estate here for your money than in, for example, Monaco. The British Virgin Islands are too far from Britain and Cyprus is potentially in as much trouble as Greece,” says Barrett, who retired as chief operating partner with the private equity company Apax four years ago.
“It can’t compete with London as a cultural centre, but the people are friendly and you can walk the streets safely any hour of the day or night. That means a lot in this day and age.”