Property boom in Malta
Residential construction levels and property prices in Malta exploded between 2003 and 2004, recording price increases of 20.3% and 13.3% respectively, after a 2003 referendum voted in favor of the accession of Malta to the European Union on 1 January 2004.
Located in southern Europe just off the coast of Sicily, properties in Malta, comprising an archipelago of seven islands, with a population of 400,000, have long attracted overseas nationals. This is not only due to Malta’s intense Mediterranean climate but also due to the country’s tax efficiency; Maltese residents enjoy one of the lowest income tax levels for Malta properties in Europe.
The price increase
Most economies in the world had large increases in inflation during the first half of 2022, which raised the cost of a variety of products and services. Consumer prices in Malta increased from an average annual rate of 0.7 percent last year to an annual rate of 6.8 percent in July 20221, indicating that the country was not immune to such inflationary forces. For products traded on the domestic market, the industrial producer price index, which tracks the evolution of transaction prices from the producer’s perspective, climbed even more. The index rose 9.2 percent from June 20212 to June 2022.
Increased construction costs
The rise in inflation means greater costs for building supplies and machinery for business owners in the construction sector. Additionally, the industry had to pay more to comply with recently established building requirements.
Construction operators face the additional challenge of having to account for these price changes several months in advance because the majority of construction work is project-based and prices are typically agreed upon prior to the start of works, even though these difficulties are common to other economic sectors. This holds somewhat true for residential properties as well because many of them are bought and sold.
Application for real estate in Malta
But international demand for homes in Malta, mainly from the UK and Scandinavia, has declined over the past year or so. This is especially true for “British shoppers,” largely due to the “fall in the value of the British pound” against the euro and the Maltese lira, says Paul Hay of Malta Homes. The decline in the value of the pound has significantly increased the cost of property for sale on malta.
Although property prices have fallen, the decline has not been anywhere near as dramatic as in most other European markets,” adds Hay. However, domestic demand for homes in Malta has been “surprisingly resilient,” says James Vassallo, senior manager, of real estate development of Tigne Point.
Vassallo continues, “Low-interest rates have encouraged gatekeepers to engage [in real estate transactions] and have made those casual deals that much more enticing.”
Property prices in Malta are starting to stabilize
While home values are still declining in some areas, they have already leveled off in other regions, mainly because the majority of property owners in Malta are not as heavily indebted through borrowed money, as UK residents say.
Despite the short-term market slowdown, the Maltese property sector could find itself flying high in the medium to long term, buoyed by rising levels of tourism and an ever-increasing number of low-budget airlines.
The houses of Malta fly high
In 2008, EasyJet, Ryanair, and Scandinavian Airlines introduced or increased their direct routes from the UK and Sweden to Malta.
Vassallo adds: “Increased air traffic is certainly good for the island, especially in these difficult times. Malta is strategically positioned between West and East and the growing importance of North Africa. It appeals to businesses looking to relocate to the Mediterranean and business travel has grown steadily.”
Investment property rental in Malta
While there may have been a decline in overseas demand for buying homes in Malta, Hay says increased levels of tourism are increasing the requirements for holiday homes in Malta to be let.
“From a holiday rental standpoint, 2009 appears to be a healthy one, taking into account the global economic situation,” says Hay. 2009 for some years.”
Vassallo says some of the best rental returns, albeit at relatively low returns – around 4% – are obtained by buying property in Sliema, property in St Julians, property in Valletta, and property in St Paul’s Bay.
However, it is worth noting that any foreigner wishing to rent out their home in Malta, has to register their property with the Hotel and Catering Establishments Board, and it can only be rented out on a short-term lease.
Furthermore, foreigners are only allowed to buy a single property in Malta, and usually only for owner occupation purposes, unless they purchase property in a ‘Special Designated Area (SDA)’ which allows them to buy property in Tigne Point, properties in Portomaso, properties in Manoel Island, properties in Chambray and properties in Cotton.
Maltese properties located in an SDA do not face some of the strict restrictions imposed on foreigners who otherwise wish to rent out their homes in Malta.
Residency in Malta
One way to overcome the limitations imposed on overseas nationals is to become a Maltese resident, which would also offer middle-income earners a genuine opportunity to reduce taxes.
Malta charges no capital gains tax on property sales after three years of ownership, but any local or foreign income brought into Malta is taxable at a rate of up to 35%. However, residents can take advantage of the Maltese residency scheme, which app
After a 2003 referendum resulted in a yes vote, Malta’s residential construction levels and real estate prices took off between 2003 and 2004, with price increases of 20.3% and 13.3%, respectively. This was in response to Malta’s entry into the European Union on January 1, 2004, which was approved in the referendum.
Being a Maltese resident is one method to get over the restrictions placed on foreign nationals, and it also gives middle-class earnings a real chance to pay less in taxes.
The price of real estate for sale in Malta has dramatically increased due to the drop in the value of the pound.
Low borrowing rates have encouraged gatekeepers to engage in real estate transactions, according to Vassallo, and have made those casual deals even more alluring.