Igor Iribar is a curious cat always eager to learn more about whatever he can lay his paws on. A jack of all trades when it comes to everything about language, he has worked as a freelance copywriter, editor, proofreader, and transcriptionist. He is currently a communications assistant at MARE Summit 2022.
Introduction
Hope springs eternal, as the saying goes. At the beginning of March, sixty per cent of US residents thought that the worst of the pandemic was already over. Investors and businesses are riding the wave of this sentiment, eager to find both traditional and new investment opportunities. At the same time, trade fairs, which have laid dormant for obvious reasons, are slowly blossoming again.
Whether someone is looking to jumpstart their Real Estate business in Malta or looking to invest in the sector through conventional or more innovative approaches, they stand much to gain by getting up to date on what’s the latest the market has to offer.
If you are reading this article, you are probably not a big investor, which is why mentions of Small and Medium Enterprises (SMEs) are so prominent throughout it. You may be interested in allocating money to Real Estate, but your level of proficiency on the topic might not even cover the most basic rudiments. Maybe you do know the basics and are eager to know more about what new opportunities the latest financial technologies are bringing to the proverbial table. Maybe you are just looking to set up a new small company in Malta. Be as it may, this article will be of interest to you.
A Primer on Real Estate
In recent years, property has become a popular vehicle of investment due to, on one hand, its seemingly reduced risk profile when compared to equity (broadly speaking, company stocks) and commodity markets and, on the other, to the slow but steady upward trend of property prices. With an everincreasing amount of capital chasing a limited number of deals, it is expected that the coming decades will witness real assets continuing to appreciate.
Properties are long-term assets. As such, they represent a major financial commitment for the people that hold them. For many, such as you, a house is probably the one and only investment of your life. For others, Real Estate represents not only a physical asset (a place to live in), but also a financial one, a source of return, a way of diversifying their portfolios, or all of the previous combined.
The first option people think of when they think about investing in Real Estate is buying a property and putting it on lease, a practice known as direct investment. Although that is a viable option, it is just a drop in the bucket in terms of all the Real Estate investment choices at the disposal of both professional and retail investors.
Although a multitude of alternative ways to get involved in Real Estate do exist, many potential investors are intimidated by the abundance of options and the jargon-laden language that they quite simply don’t understand. What they often need is an industry insider to assuage their uncertainty and confusion.
In one of the conferences taking place at Mare Summit, the biggest trade fair of the Property industry taking place on May 4 and 5 in Malta, Douglas Salt, director at Frank Salt Real Estate, will lay down the ABCs of investing in property. He will discuss key concepts of Real Estate investments, starting with liquidity, volatility, and diversification, and continuing with active vs passive investments.
Regulations are yet another common barrier for retail (non-professional) investors that are just starting out. Nothing dissuades a would-be investor faster than the prospect of having to deal with byzantine tax regulations, a problem which is often compounded in the case of foreign investors. At the previously explained conference, Mr. Salt, with its 20 years of experience as a Real Estate consultant, will explain how to recognise, measure, and disclose investment properties under Maltese and international regulations.
Small Country, Small Enterprises
If one is looking to invest in Malta, the first thing that must be borne in mind is that virtually all firms (approximately 97%) have 10 employees or less.
This also holds true for the Real Estate sector. Construction and Real Estate are dominated by micro firms (defined as those with less than 10 employees). In 2018, they represented a whopping 55% of the sector’s added value, followed by small enterprises (between 10 and 49 workers), which account for approximately a third of the added value.
Indeed, SMEs are a time-honoured feature of the Maltese economy. The majority of pre-pandemic growth was concentrated on this type of enterprises, with their turnover growth being five times the EU average. Notwithstanding the changes that covid-19 brought, they enjoy the following perks over their “big brothers”:
- They are more flexible than larger firms.
- They tend to work as vehicles of innovation.
After the sharp decline caused by the tumultuous year of 2020, SMEs have ample room to grow. Abigail Mamo, CEO at Malta Small and Medium-sized Enterprises Chamber (SME), will delve on the topic of the new opportunities and investment support that are to be expected for this kind of enterprises on the upcoming years in a panel discussion that will take place at MARE Summit.
At the Vanguard of Digital Penetration
At this point in time, there is no doubt that the covid-19 outbreak is accelerating existing trends in society, having lasting effects on how people live, work, and play.
Physical distancing has directly changed the way people inhabit and interact with physical spaces, and the knock-on effects of the virus outbreak have given rise to new needs. Social distancing and lockdowns served as a wake-up call for many businesses, as it highlighted the limits of business models which rely on physical contact. This rang particularly true for SMEs, as many had to close down for good. Digitalisation was no longer optional.
For the most forward-looking of investors, this trend of digitalisation is far from new. Back in 2019, the OECD had already identified blockchain technology and fintech (a fancy word for the use of technology to streamline financial services and processes) as two key digital technologies that could benefit SMEs.
Malta is known for being the place where regulatory innovation and emerging technologies come together. The small republic has managed to create the right conditions for companies of all sizes, both local and foreign, to thrive by meeting the demands of an ever-increasingly innovative and competitive global market.
Because of all of this, it has become an attractive destination for international investors, who are growing increasingly convinced of its potential and future. One of the key reasons for this is its commitment to digitalisation. According to the Annual Report on European SMEs 2020/2021, the archipelago ranked 5th in the top of digital performers of the EU, closely after Finland, Sweden, Denmark, and the Netherlands.
Tech-savvy investors will feel at home at the previously mentioned MARE Summit, as the event will not be limited to the more “traditional” investment vehicles. To the contrary, digital disruption and the way the Property industry is adapting to the challenges posed by the pandemic will occupy a prominent position at the hybrid event. For example, SolidBlock, an up-and-coming digital platform for the creation and funding of digital financial products, sits at the confluence of blockchain and fintech. Yael Tamar, its Co-CEO & Co-founder, will discuss the intricacies of tokenisation and decentralised finance and how they will be used in Real Estate.
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Disclaimer:
Any views or opinions presented in this article are personal and shouldn’t be taken/used as professional advice as we are not qualified financial advisors.
Any statistics mentioned have all been linked to their respective documents together with their ownership.
Lastly, we would like to note that this article has no tie to our professional jobs and was conducted in our free time.