The price hikes were felt across all property types:
- Apartments saw a 7.32% nominal price increase over the year to Q4 2015, or 5.85% when adjusted for inflation.
- Terrace houses had the highest price increase of 17.86% during the year to Q4 2015 (16.25% inflation-adjusted).
- Maisonettes also posted a double digit price rises of around 15.21% y-o-y in Q4 2015 (13.63% inflation-adjusted).
- "Other houses", consisting of townhouses, houses of character and villas, increased by 7.96% y-o-y in Q4 2015 (6.49% inflation-adjusted).
The central bank attributed the upward price trend partly to the government measures aiming to support property demand. This includes the Individual Investor Programme, introduced in the government’s November 2013 budget, which targets high net worth individuals.
Also, the stamp duty exemption for first-time buyers on the first €150,000 of a new property’s value has been extended again till December 31, 2016. The scheme saves first-time buyers up to €5,000 (US$ 5,606), and also applies to promise of sales signed from July 1, 2015. Buyers who have paid after July 1, 2015 (when the scheme was originally supposed to end) are still entitled to a full stamp duty refund.
From 2000 to 2007, the Maltese property market enjoyed strong growth, with the overall house price index rising by 78.9% (53.4% inflation-adjusted). Over the same period:
- Terraced houses saw the largest price increase of 105.3% (76% inflation-adjusted)
- Apartment prices rose by 83.3% (57.1% inflation-adjusted)
- Maisonettes prices increased by 81.4% (55.5% inflation-adjusted)
- Townhouses and villas rose by 71.9% (47.4% inflation-adjusted)
However, property prices started to fall in 2008 due to the global financial meltdown. The house price index dropped by 4.4% (-9.1% inflation-adjusted) in 2008, 1.4% (-1.1% inflation-adjusted) in 2009 and another 2% (-5% inflation-adjusted) in 2010.
After a short-lived recovery in 2011, house prices fell again by 2.2% (-5.2% inflation-adjusted) in 2012. House prices recovered, rising strongly in 2013, due to government's launch of new property-related measures. Strong price hikes continued in 2014, although the increases slowed at the end of the that year.
There are many restrictions on property ownership in Malta. Foreign nationals and EU citizens can usually only buy one property in Malta, and usually only for owner-occupancy, though 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 €233,000, has a swimming pool, and is registered with the Hotel and Catering Establishments Board. Foreign-owned properties can only be rented out for short-term lease agreements.
Analysis of Malta Residential Property Market »
Investment apartments in the favourite expatriate areas such as Sliema, St. Julians and Swieqi have average prices per square metre of around €2,000 to €2,900. In these areas, one can expect to earn an average rental return of around 3.8%.
Frankly, these are not great rates of return.
Residential prices in Malta are now moving up again, according to the Central Bank of Malta.
Round trip transaction costs are rather high in Malta. See our Malta transaction costs analysis and our Malta transaction costs compared with other countries.
Capital Gains: There is no tax on capital gains. The Capital gains tax is a generally levied at a flat rate of 12% on the transfer value or the selling price of the property.
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: Resident citizens are taxed on their worldwide income at progressive rates. Resident foreigners are liable to tax only on their income sourced in Malta.
Nonresidents 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.
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.
Malta's rapid expansion in 2015 followed 3.5% growth in 2014. The Maltese economy had expanded by 3.2% annually from 2005 to 2008, and contracting by 2.5% in 2009 due to the global crisis, the economy bounced back strongly with real GDP growth rate of 3.5% in 2010, 2.1% in 2011, 2.5% in 2012, and 2.4% in 2013.
In 2016, the EU expects Malta's economy to expand by 3.9%, the third highest in the EU, after Ireland and Romania.
Malta's fiscal deficit was only 1.6% of GDP in 2015, down from 2.1% in 2014, and 2.6% in 2013. The deficit is expected to drop further to 1.1% of GDP in 2016.
Among the EU countries, Malta had the third lowest unemployment rate in January 2016 at around 5.1%, next only to the Czech Republic and Germany, and half Euro Area's (EA19) average unemployment rate of 10.3%.
Inflation rose to 1% in February 2016, up from 0.8% in January 2016, and an improvement on 0.6% inflation the same month last year. The recent inflation was the EU's second highest rate (tied with Austria), next only to Belgium with 1.1% inflation, according to Eurostat.