By property type:
- Terraced house average prices rose 4.1% (2.2% inflation-adjusted) y-o-y in Q1 2013
- Apartment prices dropped 2.4% (-4.1% inflation-adjusted) y-o-y in Q1 2013
- Maisonettes rose 2.3% (0.5% inflation-adjusted) during the year to Q1 2013
- Townhouses and villas increased by 4.9% (3% inflation-adjusted) y-o-y in Q1 2013
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 overall house price index dropped by 4.3% (-9% inflation-adjusted) in 2008, 1.4% (-1.1% inflation-adjusted) in 2009 and another 2% (-4.4% inflation-adjusted) in 2010. After a short-lived recovery in 2011, house prices fell again by 2.2% (-5% inflation-adjusted) in 2012.
Residential construction remains depressed. The total number of new dwelling permits, an indicator of the health of the construction sector, plunged 17.3% in 2012 to 958 permits from a year earlier, the lowest level since 2003, according to the Malta Environment and Planning Authority.
The Maltese economy expanded by 1.6% in real terms in the first quarter of 2013, making it the best EU performer during the period, according to the National Statistics Office (NSO).
Despite this improving economic outlook, the property market is expected to remain weak for the rest of the year, according to the CBM.
There are many restrictions on property ownership in Malta. Foreign nationals and EU citizens can only buy one property in Malta, and usually only for owner-occupancy. 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 €233,000, 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.
Analysis of Malta Residential Property Market »
Investment apartments in the favourite expatriate areas such as Sliema, St. Julians and Swieqi are now more affordable have average prices per square metre of around €2,750 to €3,500. In these areas, one can expect to earn an average rental return of around 3.4%.
Frankly, these are not great rates of return.
Capital Gains: Capital gains are generally taxed at a flat rate of 12%, levied 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.
The Maltese economy expanded by 3.5% annually from 2005 to 2008. After contracting by 2.6% in 2009 due to the global crisis, the economy bounced back strongly with real GDP growth rate of 2.9% in 2010 and another 1.7% in 2011. In 2012, the economy expanded by a meagre 0.8%, mainly due to the eurozone debt crisis.
The Maltese economy expanded by 1.6% in real terms in the first quarter of 2013, making it the best EU performer during the period, according to the National Statistics Office (NSO). The country’s GDP reached €1,654.8 million in Q1 2013, up 3.7% from the same period last year.
The country’s real GDP growth is projected to be 1.4% in 2013 and 1.9% next year, mainly driven by domestic demand and government investment, such as the construction of a new gas-fired plant and liquid gas facilities in Delimara commences, according to the CBM.
The government deficit widened to 3.3% of GDP in 2012, up from 2.8% of GDP in a year earlier. The government is committed to bring down the deficit to below 3% of GDP in 2013, but the EU has forecast that the deficit will increase to 3.7% of GDP this year.
In March 2013, the seasonally-adjusted unemployment rate in Malta stood at 6.5%, up from 6.3% the previous year - one of the lowest levels in the euro area. Unemployment rate is projected to fall slightly to 6.4% in 2014, according to the CBM.
Inflation slowed sharply to 0.9% in April 2013, down from 2.6% in the same period last year.