When Chris Wood’s employer proposed transferring him from Dublin to Malta, he pictured a change in lifestyle. “I wanted to get away from the rain and spend my days off at the beach relaxing with an ice-cold beer,” he says. Today, he lives in a flat a 30-second walk from his office in Msida, but his home is surrounded by construction sites.

It is not just this neighbourhood. Cranes are multiplying on the Maltese horizon, roads are being widened and building-height restrictions are being lifted as the island adapts to accommodate the influx of companies and investors to which the government is offering incentives to settle on its shores.

Due to tax refunds, companies are able to pay an effective corporate tax rate of about 5 per cent, which makes it the lowest in the EU. It was the first European country to introduce remote gaming regulations in 2004, and online gambling companies contributed 12 per cent of Malta’s gross domestic product in 2016. But the industry is also at the centre of a Mafia corruption probe led by the Italian authorities. Undeterred, prime minister Joseph Muscat is promoting Malta as a “blockchain island”. In 2014, he also brought in golden visa schemes, allowing foreigners to buy a Maltese passport or residency.

Malta’s construction frenzy has provoked anger. In June, hundreds of Maltese protested after a house was damaged by excavation works nearby. “The number of permits issued actually exceeds Malta’s population growth, and a large chunk of what is being built is not aimed at providing housing [but] for purchase by wealthy persons from abroad,” said Andre Callus, an activist with the collective Moviment Graffitti.

Grace, a 61-year-old resident of Xghajra, no longer opens her windows because of the dust. “Everywhere is blocked; there is no air. Of course they are creating a lot of jobs, but they are destroying the island,” she says. Grace lives with her 27-year-old daughter Sharon, a teacher, who cannot afford to move out of the family home.

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Malta’s house prices have soared and blocks of flats are following suit. Between 2015 and 2018, the number of dwelling permits allocated annually more than tripled, from 3,957 to 12,885; almost all of them are for apartments.

Perry Estate Agents is marketing a two-bedroom penthouse with a balcony overlooking the rocky Sliema coast for €2.7m. Sotheby’s International Realty is marketing a three-bedroom apartment with sea views for €6m in Mercury Tower, a Zaha Hadid-designed development in St Julian’s that is set to be the tallest on the island. “The prime minister says he has Malta in his heart,” says Grace. “I say he has Malta in his pocket.”

A rendering of Mercury Tower, St Julian’s

In April, the Council of Europe anti-corruption watchdog published a report accusing the Maltese government of apathy in combating corruption and money laundering, including in relation to the sale of land and the golden visa schemes. Laure Brillaud, senior policy officer at consultancy Transparency International, says there are insufficient checks for money laundering and tax evasion. “The most recent case was a Russian national arrested for money laundering [in Finland] and he was found to have obtained Maltese nationality in 2015,” she says.

To qualify for a passport, applicants must pay the government €650,000, invest €150,000 in approved financial instruments and buy a property for at least €350,000, or rent for a minimum annual cost of €16,000. Technically, they need to reside in the property for 183 days a year for five years, but the Maltese regulator has said “physical presence” is not required. So far, 1,431 people have been accepted on to the programme, most of whom rent. Many who do buy spend well over the threshold: last year the average property purchase price was €1.2m. A 2018 IMF report warned that a rapid influx of housing investment in Malta could lead to a property bubble.

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“Our [citizenship-buying] clients prefer city living . . . it is more convenient and they have pools and gardens all over the world,” says Robert Spiteri Paris, co-managing director and head of lettings at Perry. “They are not based here permanently. They don’t have family or friends; they just need a place where they can shut the door.”

Before Maltese journalist Daphne Caruana Galizia was murdered in 2017, she had been investigating corruption and the citizenship scheme. “There is a lot of construction and a lot of corruption” in the sale of land as well as in the granting of passports, says her son, Matthew Caruana Galizia, also an investigative journalist. Three men this week were formally charged over her murder.

There are alleged conflicts of interest. The permit for the DB Tower in St Julian’s was revoked in June when a planning authority board member was found to be a shareholder in Re/Max, an estate agent marketing the flats.

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Carmel De Gabriele, the regulator managing the investor citizenship programme, rejects claims the scheme has links to corruption and money laundering. Kate Everett-Allen, head of international residential research at estate agent Knight Frank, thinks the scheme has had minimal impact. “Given the scale of the population, the demographics and the housing stock, [1,431] doesn’t sound like a significant figure . . . annual [house price] growth in Malta reached double figures at the end of 2015, but that was when the economy started reaching higher annual growth.”

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Sharon’s teaching salary has not kept up with rising prices, leaving her too rich to qualify for social housing but too poor to buy or rent in a market with no affordable housing. “You cannot just buy a one-room property for a family,” she says.

Some newcomers are complaining too. “It has changed the scene from a lovely little island in the Mediterranean to a very busy island with a lot of cars and taxi services,” says Jacques Vissers, a Dutch director of an online betting business. After 12 years, he is ready to leave.

Buying guide

  • Most sellers ask buyers to enter into a promise of sale agreement, or a konvenju, before the final deed of sale. There is no law on what needs to be agreed to, but it generally covers the purchase price and conditions around building permits
  • When buying a property, expect to pay 5 per cent stamp duty and a 1 per cent notary fee. There are no clear rules about agency fees, but generally the seller pays 5 per cent commission

What you can buy for . . . 

€200,000 A new two-bedroom apartment in Gzira
€2m A three-bedroom villa in Madliena with pool

More at propertylistings.ft.com

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