The Malta Independent 3 December 2021, Friday

‘I don’t care, choose the least expensive’: Malta’s IIP citizens’ dream homes and the rental market

Albert Galea & Nicole Meilak Friday, 23 April 2021, 07:15 Last update: about 8 months ago

The Passport Papers | A deep-dive into the properties rented by IIP applicants and the effects the programme may have had on the rental market. This story is by Malta Independent Online Coordinator Albert Galea and MaltaToday's Nicole Meilak.

A treasure trove of data from the servers of Individual Investor Programme concessionaire Henley & Partners has revealed the places that some of those who bought Maltese passports call home – and many of them are far from the luxury that these financially well-off individuals would usually be expected live in.

The data, which provides the bedrock of the Passport Papers collaboration, shows how over 300 applicants paid near-enough the bare minimum in rent, for properties which were not fit for either purpose or for their price.

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The purchase or rent of property in Malta is one of the requirements that applicants for a Maltese passport under the IIP have to satisfy.  As part of the scheme, applicants had to either purchase a property worth at least 350,000 or rent a property for five years at a minimum rate of 16,000 per annum – equivalent to 1,333.33 per month.

From the data, it emerged that the applicants who actually purchased a property were few and far between – with the vast majority opting to rent a place in Malta instead.  Furthermore, most of those who did rent a property, did not pay over 1,400 per month in rent.

Pictures of the properties – such as the one below, which was rented to Russian applicant Vadim Vasilyev, a man more used to the boulevards of Monaco than the streets of Gzira, for his 12-month residency period – reveal the quality, or lack thereof, of the properties which applicants were taking up.

Over half of applicants paid less than 1,400 per month in rent

The data shows that 319 out of 594 applicant groups did not pay over 1,400 per month in rent – equivalent to 16,800 per year, and barely above the 1,333.33 minimum rent per month set out in the requirements for Maltese citizenship.

The vast majority of these 319 applicants in fact opted for renting property at a set price of 1,350 – the round number closest to the minimum as established by the programme.

Indeed, 215 applicants paid this set price as part of their rental agreements, while another 70 paid €1,400 per month.  13 paid the absolute bare minimum required by the programme - €1,333.33 per month – and the remaining 21 are split at varying costs which all fall between the minimum and €1,400 per month.

In terms of the localities, Sliema was the most popular destination for passport applicants, with 208 renting properties over there, while St. Julians’ was the second most popular locality.  Properties in Marsalforn, Ghajnsielem, Mellieha, St. Paul’s Bay, Ta’ Xbiex, Mosta, and Swieqi were also rented out to different applicants.

Applicants could grant power of attorney to Henley & Partners’ real estate arm so that they find and acquire property on their behalf, based off of a list of preferences which the applicants themselves chose on a form provided to them by Henley.

Applicants could give details such as the price range they would like the rent to be in, how many bedrooms they would like the property, and whether they would like anything a bit more specific.

It’s here and in other correspondence seen in this collaboration that it becomes clear that some applicants were not all that bothered with purchasing a dream home in the sun – or even with living in Malta to begin with.

One client who filled in a form directing Henley to find a property for him simple wrote at the bottom of it: “I DON’T CARE WHAT IS LEAST EXPENSIVE WHICH COMPLIES W/PROGRAM.”

Apartments left empty: ‘Nobody will go there for a year’

One Chinese national rented a two-bedroom apartment for €1,500 a month, despite applying for citizenship for 12 people – including six children – showing that the flat was not likely to be used for any form of living.

Another client – a South African businessman – refused to pay Henley a property management fee on the simply basis that nobody would be using the property in the first place.

“It’s not used, nobody will go there for a year,” he complained in an email to the firm. “If Henley inspected it and all is in good order, what on earth could go wrong? The owner will take it back as it was leased.”

The Malta Independent and MaltaToday have already reported, meanwhile, the travails around a block of apartments in Marsalforn, Gozo called Vista Point – a block which was being rented out to applicants before it had even finished being built.

One client complained to Henley that – two months after the lease agreement was signed – it was obvious that the place wasn’t in a habitable state.

"The family visited their apartment yesterday in Vista Point and met with [the developer]. They were surprised that the construction is not yet finished. It is on the last stage, but still not finished. For example, not all electricity connections are finished, and so on. It is obvious that the client cannot reside in such a property," the email reads.

In a separate thread, the applicant’s assistant admitted that this was a minor issue, as the family was not planning on residing there in the first place, but argued that the client should have been informed about the situation beforehand.

Indeed, over 30 units of the residential block – which is made up of 35 apartments – were rented out to IIP applicants at €1,350 per month each.

Henley’s database holds a number of pictures of what these apartments look like from the inside.

Applicants for Maltese citizenship don’t necessarily need to live in Malta, even though a 12-month residency period is one of the requirements. 

“Malta reiterates that physical presence, in contrast with legal residence, is not a precondition to acquire nationality in Malta nor in any other EU member state”, the scheme’s head Jonathan Cardona told the collaboration.

This meant that it is highly likely that none of those who did apply for Maltese citizenship actually spent anywhere near a year actually residing in Malta before being granted a passport.

It’s a phenomenon which continues to this day: just four days ago, a real-estate agent took to Facebook’s marketplace to advertise a property in Sliema which was up for sale – boasting that it was being rented out to a passport buyer for €1,350 per month and that it had never been lived in.

The listing has since been removed after it was exposed in the first round of Passport Papers yesterday.

The IIP and the rental market

The effects of the IIP on the local rental market as a whole have not been fully quantified, but a boom in rental prices did coincide with the programme being launched.

In 2017, the Malta Developers Association, through their yearly survey on the property market in Malta which is carried out by KPMG, warned that Malta’s rental market was close to overheating, with rent prices having risen by a whopping 47% between 2013 and 2016.

The same KPMG in 2019 said that rental prices below 1,000 were in short supply, and that there was an excess of properties priced between 1,000 and 2,000.

“One suggested reason was that many properties were priced at approximately €1,300 per month to meet the requirements of the Individual Investors Program,” the report says, adding that high-end developments were not performing as well as expected.

The Central Bank of Malta also listed the IIP as one of the reasons behind the substantial price in both housing prices and the rental market in their 2016 assessment on the housing market.

Under the changes made to the IIP as Malta attempts to go for the second round of the programme, the minimum rental payment has been bumped up from 16,000 to 18,000 – which is the equivalent of 1,500 per month.

The Chamber of Commerce had commented on this when the new requirements were announced, saying that the increase in the minimum requirement will only serve to artificially inflate rental prices.

Knowledge of the fact that the majority of applicants paid the bare minimum required by the programme, many times for properties which were not worth that amount, seem to support this fear.

This is a joint investigation by The Malta Independent, MaltaToday, and other partners, coordinated by the Daphne Caruana Galizia Foundation. The production of this investigation was supported by a grant from the Investigative Journalism for Europe (IJ4EU) fund.

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