By Jp Fabri

Copyright maltatoday

Malta’s latest land valuation study tells a striking story. Over three decades, the estimated value of land underlying dwellings surged from billions in the mid-1990s to tens of billions today. Land now accounts for the lion’s share of a home’s total value. This is not a marginal trend. It is a structural feature of the economy that shapes incentives, household balance sheets, and where capital chooses to flow.

Rising land values are not a problem in themselves. They reflect scarcity, location premiums, and Malta’s success in attracting people and activity. They also underpin the collateral that banks lend against, which supports consumption and investment. The challenge is that very high and rising returns to land tilt the playing field. When the safest and most familiar asset keeps appreciating, private savings tend to chase property rather than fund new firms, technologies, and capabilities. The result is a pattern of wealth accumulation that is strong on paper but weak on risk capital for innovation.

The imbalance shows up in two ways. First, households that own property feel wealthier and borrow more against it, but that liquidity rarely becomes equity for start-ups and scale ups. Second, entrepreneurs face a financing ladder that is steep in the early stages and patchy beyond the first rounds. Banks, rightly, focus on secured lending. Venture funds are nascent but remain too small for the size of the ambition. Malta ends up with plenty of collateral and not enough patient capital.

Other countries have tried to solve versions of this problem by creating bridges between household savings and productive risk capital. France mobilised large institutions through the Tibi initiative to anchor growth equity funds for tech scale ups. The UK used targeted tax reliefs like EIS and SEIS to crowd-in retail investors to early-stage companies. Portugal launched a co-investment vehicle that matches private capital into domestic funds. Estonia created a state backed fund manager to fill early market gaps and attract global fund managers. Ireland’s sovereign fund has backed local venture and growth strategies with a double bottom line mandate. None of these models is a perfect template for Malta, but all show how public architecture can tilt incentives without replacing markets.

Malta has two tools that can turn this structural advantage in land into a structural advantage in innovation. The Malta Development Bank already reduces collateral and cost for SMEs through guarantees and co-lending. The Malta Venture Capital Fund initiative has begun to plant the seeds of a domestic venture capital pipeline. The next step is to connect household balance sheets to these platforms in a safe, diversified way.

Three practical moves can do that. First, create a home-to-innovation line of credit that is secured conservatively against property but deploys into a diversified, professionally managed innovation fund of funds. The MDB provides a capped first loss guarantee to protect households from downside tails, while private managers select funds and enforce strict governance. This converts passive real estate equity into patiently held stakes in a broad portfolio of Maltese and European venture and growth funds.

Second, introduce a Malta innovation allowance that gives time-bound tax incentives for individuals who allocate savings into approved early stage or growth vehicles, with higher relief when investments are held for longer. This channels capital toward patient horizons rather than short term flips, and it can be designed to reward co-investment alongside independent private fund managers.

Third, scale co-investment capacity so that every eligible euro of private capital from households, family offices, and pensions into approved funds can be matched transparently by the public anchor but capped to a certain level. Clear sunset clauses keep the state catalytic, not permanent, and performance reporting builds trust.

Safeguards matter. Property linked instruments must be conservative on loan to value and fully ring fenced from personal cash flow risk. Diversification must be real, with exposure spread across stages and sectors rather than concentrated bets. Governance must be independent, with investment decisions at arm’s length and published performance metrics. Retail participation should be mediated only through regulated vehicles and trusted intermediaries.

Done well, this is not about pushing people out of property. It is about giving savers a credible second engine. Land wealth remains a store of value. A connected innovation architecture turns part of that wealth into working capital that builds firms, exports, and higher quality jobs. Over time, a stronger innovation base supports incomes and stabilises public finances, which in turn sustains household wealth. The system becomes circular rather than one way.

Malta’s Achilles heel is not that land is valuable. It is that the system does not yet translate that value into the risk capital required for the next economy. The data is a prompt to act, also in line with the ambition of Vision 2050. Build the bridge, align incentives, protect households, and let property rich Malta also become innovation and enterprise rich Malta.