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Malta: Overview

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Last Updated: Jun 20, 2007

Building boom hits island paradise

Malta is experiencing the mother of all building booms. Rents have hardly risen over the past decade, indeed in some places have fallen; but property prices have risen by around 400% in nominal terms over the past fifteen years. House prices surged dramatically in the mid-1990s, as a result of several years of strong GDP growth.

This produced a building boom, creating an over-supply of rental apartments.

Now house price rises seem to have stalled.

In 2006, house prices rose only 3.70% in nominal terms, and stayed static in real terms. In 2005, they rose 10.40% in nominal terms (7.18% real). In 2004, they rose 16.91% in nominal terms (13.73% real) because of Malta’s May 2004 accession to the European Union and the Investment Registration Scheme (September 2001 to June 2005), effectively a tax amnesty for residents who had invested overseas.

Foreign nationals and EU citizens can only buy one property in Malta and Gozo. But they can buy more properties in ‘specially designated areas’ such as Tigne Point, Portomaso, Cottoenra, Manoel Island, and Chambray.

Properties owned by foreigners can be rented out only if the property is valued over LM 100,000 (€233,800), it has a swimming pool, and it is registered with the Hotel and Catering Establishments Board. Foreign-owned properties can only be rented out for short-term lease agreements.

Read Price History  »

RENTAL YIELDS

Malta yields very poor at 3.14%

Yields on apartments on Malta Island are at 3.14%, reaching up to around 3.5% for apartments with 180 sq. m. A 120-sq. m apartment has relatively the lowest yield at 2.85%, selling for the cheapest as well at €2,814 per sq. m. Apartment prices average around €3,694 per sq. m. The smaller the unit, the higher the per sq. m price, going as high as €5,908 for 30-sq. m apartments.

Read Rental Yields  »

TAXES AND COSTS

Taxes are moderate to high in Malta

Effective Tax Rate on Rental Income
Monthly Income €1,500 €6,000 €12,000
Tax Rate 17.8% 25.5% 26.7%
Click here to see a worked example
Source: Disclaimer

Rental Income: Net rental income is taxed at of 20%, 30% or 35% depending on the amount.

Capital Gains: Capital gains are generally taxed at a flat rate of 12%, levied on the transfer value or the selling price.

Inheritance: There are no inheritance taxes in Malta, but there is a transfer duty payable by the heir at 5% of the declared property value.

Residents: Residents citizens are taxed on their worldwide income. Resident foreigners are liable to tax only on their income sourced in Malta.

Read Taxes and Costs  »

BUYING GUIDE

Buying costs are low to moderate in Malta

Roundtrip transaction costs ranges from 6.5% to 13.5% of property value. The buyer usually pays for the stamp duty (3.5% - 5%). Seller pays 5% real estate agent commission if the buyer is found through the services of a Registered Real Estate Agency.

Non-residents can only sell their properties in Malta to Maltese citizens. They can only sell to other foreign nationals if they cannot find a buyer who is either a Maltese citizen or an EU citizen.

Read Buying Guide  »

LANDLORD AND TENANT

Law is pro-landlord in Malta, but courts are impossibly slow

Maltese rental market practice is pro-landlord.

Rents: Rents and rent increases can be freely negotiated, except for rental agreements entered before 1st June 1995.

Tenant Eviction: Maltese law operates extremely slowly. Hugh Peralta & Associates estimate that a contested eviction could take between 690 and 1,915 days, and the enforcement of a judgment to collect rent could take even longer.

Read Landlord and Tenant  »

ECONOMIC GROWTH

Weak economic growth

Malta is composed of two main islands and several smaller islands. It is home to about 404,000 people with a GDP per capita of US$13,847. Valleta, the capital, is located in the biggest island also called Malta. Gozo is the second major island.

After 2000, the Maltese economy entered a period of stagnation, recording on average zero growth in GDP during the 2001-04 period. This was the result of an over-expansionary fiscal policy in an earlier period, which created unsustainable external and internal imbalances. In 2004, it was the smallest country to join the EU.

In recent years these imbalances have been partially unwound. Real GDP recovered in 2005 and 2006, expanding by 3% and 2.9% respectively.

The euro is likely to be adopted on 1 January 2008, and the currency is already pegged to the Euro.

 

  • Pro-landlord rental market
  • Moderate yields in Valetta
  • Low to moderate transaction costs
  • Significant ownership limits
  • High rental income tax
  • Weak economic performance

RESIDENTIAL PROPERTY FACTS
Price (sq.m): €2,814 For a 120 sq. m. property, usually an apartment. Rental Yield: 2.85% For a 120 sq. m. property, usually an apartment.
Rent/month: €803 For a 120 sq. m. property. Income Tax: 17.78% Assumptions: Owners are a non-resident couple drawing US$ / €1,500 per month in rent, with no other local income.
Roundtrip Cost: 9.2% The total cost of buying and then reselling an apartment. Includes:

* all transaction taxes and charges:
* lawyers' and notaries' fees
* agents' fees

Assumptions: The buyers are non-resident foreigners. The apartment cost US$250,00 / €250,000. 		Cap Gains Tax: 23.0% Assumptions: The property was bought for US$250,000 / €250,000, and sold 10 years later, after a 100% appreciation.
Landlord & Tenant Law: Pro-Landlord Rating is based on a detailed study of each country’s law and practice.
SEPTEMBER 2007
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DECEMBER 2006

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