The current situation in the real estate market in Malta

Briefly about the main thing

The real estate market in Malta has recently shown a trend towards steady growth. Maltese real estate has been on the rise for the past three years. According to the Central Bank of Malta, this is due, firstly, to the introduction of the IIP Citizenship by Investment program, which attracted the capital of large investors to the country, as well as exemption from stamp duty for those who buy housing for the first time. 

Other factors supporting the demand for residential real estate in Malta include the low interest rate, which has led to higher lending for home purchases; the general increase in the welfare of the population and an increase in the number of foreign workers in Malta. As well as the introduction by the government of a number of benefits for local property buyers. 

​According to the latest data from the European statistical service Eurostat, the growth in the value of real estate in Malta in 2016 amounted to 13.4%, and in the first quarter of 2017 5.4%. From 2000 to 2007, the housing price index it grew by 78.9% (adjusted for inflation of 53.4%). And only in 2011-2012, real estate prices in the country decreased slightly (by about 5% taking into account inflation), but, as a result of special new measures taken by the government, after that they fully recovered by 2013, and in 2014-2017 they show steady growth. 

Why Malta?

• Real estate in Malta is a profitable investment:The country is experiencing stable economic growth, which also affects the value of real estate. According to Malta's National Statistics Office, GDP growth was 5% in 2016, which exceeds the forecasts of the European Commission. In the fourth quarter of 2016, the economy grew by 5.1%. At the moment, data for 2017 have not yet been published, but experts predict GDP growth of about 3.7%, which is the third largest indicator in the EU after Romania and Luxembourg. 
• Real estate tax in Malta is paid once, when signing a contract of sale, and is only 5% of the cost of housing. No annual taxes are paid, which is quite rare to find in the European real estate market.
• Having a property (house, apartment or villa) in Malta, the owner can take advantage of one of the opportunities for temporary or permanent residence in the European Union (permanent residence, residence permit, long-term visas).
• ​Mortgage is cheaper than the increase in the value of real estate:a loan for the purchase of a house or apartment in Malta is issued with an initial payment of 30% of the cost of housing, at 3.5-4% per annum, until the borrower reaches the age of 65, with the right of interest-free early repayment.
• Income opportunity:in the complexes of improved comfort (SDA), it is allowed to own several real estate objects in Malta and lease the property, the yield from which is from 5% to 8% per year. The cost of renting in the "top" destinations of Malta has increased by an average of 12-14% over the past year, and there is constantly a shortage of real estate for rent. 
• Excellent opportunities for living: here is a mild Mediterranean climate, natural products all year round, warm sea, friendly local population, direct flights to all European capitals.
• Malta provides unique opportunities for children to receive high-quality education at reasonable prices, both according to full-fledged classical Russian and British or American educational programs, with the right to obtain the appropriate certificate. Adults purchasing real estate in Malta may also consider starting a business in Malta. 

Features of buying for foreigners

There are a number of restrictions on the ownership of real estate in Malta. For example, foreign citizens and EU citizens can usually buy only one unit of real estate in Malta and, as a rule, only for the residence of the owners.

The exception is the high-comfort complexes, the so-called Special Designed Areas, where there are no restrictions on either the volume of purchases or rental. Real estate in other places owned by foreigners can be rented out only if the property is valued at at least €233,000, has a swimming pool and is registered with the Board of Hotels and Catering Establishments (Hotel and Catering Establishments Board). Such objects can only be rented out for short-term rent. 

Prices

Malta is one of the leading European countries in terms of housing price dynamics. So, during the last year, the cost of apartments in Malta increased by 15.86%, terraced houses by 13.33%, maisonettes by 20.42%. Detached houses and villas rose the least by only 1.96%.

​The real estate market is very lively at the moment: all kinds of transactions are observed on it. Primary buyers and investors in the commercial sector are active. Purchases for the future are also popular for younger children, foreign direct investment and the acquisition of objects within the framework of the citizenship and residence permit program. In addition, the fact that the rental yield in Malta is on average quite high and amounts to 5-10% per annum, sales volumes are growing for the purpose of subsequent rental of real estate. 

Factors affecting the value of real estate in Malta:

• Location,sea view or proximity to the sea;
• Type — for example, an apartment, a house with terraces or a detached villa;
• The state of the object;
• Age;
• The period of ownership by the previous owner (affects taxation);
• Number of rooms;
• Total area;
• Availability of amenities such as terraces, swimming pool, courtyard or garden;
• Purpose — commercial or residential.

The most attractive areas to buy

Malta can satisfy a variety of tastes and wishes of customers: there are urbanized areas and quiet provincial places, some like apartments, some like villas, and some even buy old Maltese houses: many of them have been reconstructed and converted according to the latest fashion and are truly unique objects. 

Traditionally, relatively inexpensive areas are considered to be the island of Gozo and the south of Malta - the cities of Marsaxlokk, Marsascala, Three Cities, Birzebugga, Zabbar and adjacent.However, the situation in this regard is changing due to the fact that these regions receive additional funding and benefits from the state.

Gozo — due to its tradition, provinciality, as well as the rather complicated, by Maltese standards, process of traveling to the center; living on Gozo, it is better to live and work here, and this is mainly a local business or farming. The South has traditionally been populated by port workers and fishermen, besides, recently traffic during rush hours in the south direction is very congested. This problem is being solved — the modernization of the highway is already beginning.Nevertheless, while in Gozo and in the south you can find an apartment with one or two bedrooms within 120,000-130,000 in the northern districts of Buggiba, St Paul's Bay, Qawra, the average cost of the same apartment is160 000-200 000, in the central district of Sliema-St. Julians — €250 000-300 000. 

Sliema-St Julians are the most urbanized areas of Malta with the maximum number of luxury apartments. Most of the offices and large shops are located here, there are many gaming companies, direct access to the sea. It is not surprising that a large number of our fellow citizens live in these areas. Buggiba, St. Paul's Bay, Qawra — rapidly developing and multinational areas with good infrastructure beaches.

If we talk about houses and villas, the seaside areas of Pembroke and Mellieha are the leaders; wealthy Maltese are also very fond of Marsascala. Here, by the way, is the villa of the ex-president of Malta, who can be periodically observed at his desk right from the road. Madliena, Gharghur, Balzan, Iklin are also popular. These areas are located far from the sea (which is a relative value for an island whose diameter reaches a maximum of 27 km). They are considered quieter and are highly valued by the local population. Also, all wealthy people who are not concerned about the need to actively earn money, regardless of nationality, love Gozo; therefore, the cost of villas and traditional houses here is very high. House prices (excluding townhouses) they start from about €500,000. 

​Where to buy housing depends on the goals and capabilities of the buyer. The most liquid areas are Sliema, St Julians, StPaul's Bay, Qawra; rapidly developing — Qawra, Marsascala, Birzebugga. If the goal is to educate children (and this is a very frequent reason for foreigners to move to Malta), then it is better to look for housing closer to school. For a foreigner coming from a big country, Malta is indeed a very small country, but daily traffic jams on the way to school very quickly become tedious, especially for children.

For renting out real estate, it is best to consider two possibilities. The first is the complexes of improved comfort, the so-called Special Designed Areas (SDA). In these complexes, housing is not cheap, but it is the most liquid both for rent and for sale. In addition, if the buyer does not plan to engage in hotel business, only in these areas he can rent out his apartments legally. The second option is actually a hotel business, that is, the purchase of housing, which can be registered as a mini-hotel or guesthouse. In this case, you need to focus on the coastal areas, and if the budget is not very large, on the locations of language schools, in order to constantly have an influx of customers for short-term rental housing. These are, again, Sliema, St. Paul's Bay, St. Julians or nearby areas. 

If we talk about buying housing as an investment, then experts recommend SDA complexes, and they are located in the central districts. These primarily include Tignie Point, Fort Cambrige and Portomaso. Apartments here are initially expensive (prices start from €365 000), but their cost is growing the fastest. With a more modest budget, you can consider Qawra, St. Paul's Bay, Marsascala: these areas are developing very quickly and currently can surpass the central ones in terms of housing liquidity. 

Buyers focused on moving to Malta for permanent residence should rely on personal preferences. Those who need to be "in the center of events" and feel like they are in the city should consider Sliema and the surrounding areas. Anyone who is tired of the hustle and wants peace and quiet can take a closer look at the villas in Gozo, and if you are close to civilization, then Pembroke and Kappara will do.

Mellieha, the northern capital of Malta, is considered to be a sleeping area with villas and houses for every taste and a very pleasant audience.

The subtleties of buying real estate and taxation

• Persons who are not residents of Malta are free to purchase real estate in Malta, subject to obtaining a Permit for the acquisition of AIP (Acquisition of Immutable Property), if required by law. It is not necessary to obtain it when purchasing real estate located in complexes of improved comfort (SDA).Another exception is the acquisition of real estate by an EU citizen for the purpose of conducting his business or providing services. In this case, the declaration of the purposes of the purchase of real estate by the buyer must be attached to the purchase contract.

• Where permission is required, the price of the purchased property must correspond to a certain minimum, which changes periodically and currently amounts to €107,670 for apartments and maisonettes, €179,400 for villas, mansions and other types of real estate. These minimum prices are subject to indexing and are reviewed annually.

• Real estate under construction or in need of repair can be purchased for a smaller amount, provided that the sum of the estimated cost of repairs or completion of construction and the purchase price are not less than the above amounts. These indicators are subject to annual confirmation in accordance with the level of inflation. 

• The purchased property in Malta can only be used for the purposes of residence of the buyer and his family members. This condition may be revised if the buyer has received permission to lease the property.
• With the exception of SDA complexes, foreigners have the right to own only one unit of real estate.
• Real estate objects in Malta that have historical value or are registered as part of the island's heritage cannot be purchased by non-residents. This rule does not apply to most rural houses and houses of characteristic design on the market.

• ​Real estate tax in Malta is paid only upon purchase and is 5% of the value of the purchased object. There are no annual property taxes in Malta. ​

The purchase process

​The process of acquiring real estate in Malta takes from three to six months (with the exception of SDA — in this case, you can«meet» in one month). After selecting the object, the buyer and seller sign a contract of intent; at this stage, 1% of the total amount of tax is paid and a deposit, usually in the amount of 10% of the value of the purchased property, which is kept by a notary, whose presence at the transaction is mandatory. The notary's duties include obtaining a purchase permit, conducting an analysis of the real estate object and drafting a purchase and sale agreement.

The deposit is transferred to the seller only after obtaining a purchase permit and fulfilling other conditions of the preliminary agreement, if any.The original contract for the acquisition of real estate in Malta is kept in a single copy in the State Archives of Malta, which completely excludes the possibility of illegal transactions. The notary who analyzed the history of the property and issued a report to the buyer is personally responsible for the transaction for ten years.

Visa regime and entry for Russians

• ​Malta is a member of the Schengen Agreement, respectively, entry to Malta is carried out on a Schengen visa on a general basis. Unlike some countries, Malta practically does not issue visas for more than one year; ​
• Property owners in Malta have the right to obtain an annual multiple-entry visa with the right to stay in the territory of the member states of the Schengen Agreement for 90 days in each half-year; 
• Students and schoolchildren studying in private general education or language schools or in higher educational institutions of Malta have the right to obtain a student visa with a limited right to move around the territory of the Schengen area for a paid period of residence;
• If a minor child is studying at a private school in Malta, the adult who takes care of him/her can obtain a temporary residence permit in Malta during the paid period of the child's education, up to one year, with the possibility of extension until the end of the training. This permission is given only to one relative of the child. 

The options for temporary visas to Malta and the necessary documents are described in detail on the websiteMalta Visa Application Center. 

Residence permit and investment programs

Malta has several successful programs that allow foreigners to obtain a residence permit or citizenship of the country for various amounts of investment under the most flexible conditions for foreigners with different goals. The purchase of real estate with a value of €275,000 (€220,000 for Gozo or the south of Malta), as well as the amount of its annual rent in the amount of €9600 (€8750 for Gozo or the south of Malta) make it possible to obtain a residence permit of the country. At the same time, all the applicant's foreign income transferred to Malta is taxed at a rate of 15%. He also undertakes to pay an annual tax of at least 15,000 euros per year, even if the foreign income transferred to Malta did not exceed 100,000 euros.

​Rent

The rental market in Malta is growing at a tremendous pace, especially for short-term rentals. Maltese agents cannot cope with the demand in the summer, and the government actively helps those who develop a small hotel business, including guesthouses and apartments for rent. To be purchased by a foreigner, such housing must cost at least 230,000 euros and have a special rental permit.

​The cost of a short-term rental in Malta is calculated daily, long-term — monthly. Prices for long-term rentals in Sliema-St Julians start from €1000, in less prestigious areas, but close to the sea — from €600 per month for a one-bedroom apartment. The upper «limit» is about €12,000 per month per villa. Apartments in an elite complex in Sliema with two or three bedrooms and an open sea view will cost €3000-5000 in winter and€5000-7000 per month. The lower «limit » for short-term rentals — €50 in winter, in summer — about €75 for very budget properties. Prices for decent housing start from €100 in winter and €150in summer (and will be higher in Sliema-St Julians).

​According to the international real estate portal Global Property Guide, apartments in Malta have a long-term rental yield in the region of 4.35-4.49%. For short-term rentals, the yield reaches 10%.

Five expert tips for anyone thinking about buying a property in Malta

​1. When applying for a residence permit or Maltese citizenship, the property can be either rented or bought. If you have such an opportunity, it is better to buy than to rent. The cost of both buying and renting is growing, and is growing quite significantly and steadily; by purchasing real estate, you can subsequently make a profit from its sale. 

2. If the property is purchased for the purpose of obtaining a residence permit or citizenship, this must be specified in the Preliminary Agreement. In this case, if suddenly, for whatever reason, a residence permit or citizenship is denied to you, you will have every right to refuse the transaction without loss.