Property prices in Malta are expected to rise moderately in 2011
Strategically located in the heart of the Mediterranean Sea, Malta basks in the sun for most of the year. Blessed with long, dry summers and short, mild winters, this small island about 60 miles south of Sicily is a year-round destination for people from Europe and elsewhere. Apart from great weather, Malta has history – in variety and abundance, romance, a touch of the Orient, beautiful old houses made of golden limestone, warm and welcoming people who speak English, safety, as well as good standards of education and healthcare.
EU membership, a favorable tax structure and good infrastructure have made Malta a preferred destination for European retirees, lifestyle buyers and investors alike. For pensioners, the income tax is only 15%. No inheritance, wealth and council taxes. Corporate tax rates range from a maximum of 35% to zero. In general, the cost of living is lower than elsewhere in the EU.
Although most of the demand for property in Malta is driven by locals who consider property to be one of the best investments, foreign demand for property in Malta is also increasing as the economic situation in some EU countries improves. Encouragingly, the recession has not affected the property market in Malta as much as in other countries, and many foreign buyers now see the country as a relatively safe haven for their funds.
The Maltese economy is relatively stable and heavily dependent on tourism. In recent years, the number of low-cost flights to Malta has increased significantly, attracting more visitors every year. In 2009 and 2010, there was a significant increase in tourist traffic compared to the previous years. Multinational companies with bases in the Middle East are also setting up offices in Malta in order to reach emerging markets. Consequently, the demand for rentals has increased.
Property prices in Malta, which had weakened somewhat in 2008, are now in positive territory, largely due to relatively low mortgage interest rates, increasing demand for rental properties in some areas and the availability of quality properties at affordable prices. Overall, the Maltese property market is performing better than many others in the EU, particularly those in Spain, Greece, Portugal and Cyprus.
According to the Central Bank of Malta, price growth in the second quarter of 2010 moderated compared to the previous quarter. The bank attributes the increase to the prices of apartments, which are higher than those of houses, villas and townhouses. While the prices of maisonettes are decreasing year-on-year, the prices of townhouses remain the same.
As stated in a report based on a survey conducted by the Royal Institution of Chartered Surveyors, price increases were generally better than expected. Although prices are falling in some areas, the trend is upward in others. Regions like St Julian’s and Sliema are doing well.
Citizens from EU countries have the right to purchase a property in Malta under certain conditions. However, they can purchase more than one property in SDA or specially designated areas such as Tigne Point, Portomaso, Cottoenra, Chambray and Manoel Island. A recent amendment allows foreigners to rent out personal property to holidaymakers on a short-term basis if the property meets the standards set by the Malta Tourism Authority.
The government recently decided to ban non-EU nationals from participating in the resident scheme. The move could have an adverse impact on property sales and prices in areas that are popular with non-EU nationals.
Overall, this can be a good time to invest in property in Malta, provided one researches the market well and identifies areas that have steady demand for sale and rent and the potential for price growth. Apartments in Sliema, St Andrews and St Julians are usually a good buy. Property in Malta has a number of positives – prices are still relatively reasonable, buyers can choose from a variety of modern apartments as well as charming, old houses and prices are expected to rise over the next few years.
Points about real estate transactions:
• Once the buyer and seller have agreed on a price, they enter into a preliminary contract and the buyer usually has to pay a 10% deposit.
• This agreement is subject to the issuance of a non-resident AIP permit.
• The notary performs a search on behalf of the buyer to verify that the property has a clear title.
• After fulfilling the conditions of the preliminary contract, a final deed of sale is prepared, which is signed by both parties.
• EU and non-EU citizens must meet a number of conditions to purchase property in Malta.
• They must also provide proof that the purchase funds are of foreign origin.
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