Issue link: https://maltatoday.uberflip.com/i/1539444
11 maltatoday | SUNDAY 14 SEPTEMBER 2025 OPINION 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 bal- ance 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 attract- ing people and activity. They also under- pin the collateral that banks lend against, which supports consumption and invest- ment. 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, en- trepreneurs 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 pa- tient capital. Other countries have tried to solve ver- sions of this problem by creating bridges between household savings and produc- tive 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 inves- tors 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 at- tract global fund managers. Ireland's sov- ereign 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 incen- tives without replacing markets. Malta has two tools that can turn this structural advantage in land into a struc- tural advantage in innovation. The Malta Development Bank already reduces col- lateral and cost for SMEs through guar- antees and co-lending. The Malta Ven- ture Capital Fund initiative has begun to plant the seeds of a domestic venture capital pipeline. The next step is to con- nect 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 cred- it 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 house- holds 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 Europe- an venture and growth funds. Second, introduce a Malta innovation allowance that gives time-bound tax in- centives for individuals who allocate sav- ings into approved early stage or growth vehicles, with higher relief when invest- ments are held for longer. This channels capital toward patient horizons rather than short term flips, and it can be de- signed to reward co-investment along- side independent private fund managers. Third, scale co-investment capacity so that every eligible euro of private capi- tal from households, family offices, and pensions into approved funds can be matched transparently by the public an- chor but capped to a certain level. Clear sunset clauses keep the state catalytic, not permanent, and performance report- ing builds trust. Safeguards matter. Property linked in- struments must be conservative on loan to value and fully ring fenced from per- sonal cash flow risk. Diversification must be real, with exposure spread across stag- es and sectors rather than concentrated bets. Governance must be independent, with investment decisions at arm's length and published performance metrics. Re- tail participation should be mediated on- ly 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 con- nected 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 inno- vation and enterprise rich Malta. JP Fabri Malta's land wealth and the missing bridge to innovation Economist 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.