Malta’s residential property prices continue to rise

Malta’s residential property price growth continues, despite a temporary slowdown in demand. During the year to Q2 2023, the nationwide property price index rose by 8.3% (2.01% inflation-adjusted), following year-on-year increases of 10.51% in Q1 2023, 2.71% in Q4 2022, 5.16% in Q3 2022, 1.71% in Q2 2022, and 1.66% in Q1 2022, according to the Central Bank of Malta. In fact, it was the second-strongest growth recorded since Q1 2019.

“The NSO’s Property Price Index (PPI) – which is based on actual transactions involving apartments, maisonettes, and terraced houses – continued to increase in annual terms,” said the central bank. “House price inflation in Malta stood significantly above that in the euro area, where prices increased at an annual rate of 0.4%.”

The growth in residential property prices in Malta is supported by numerous factors, including government schemes supporting demand for property, such as the first-time and second-time buyers’ schemes, the purchase of properties located in Urban Conservation Areas (UCA) and in Gozo, as well as refund schemes for restoration expenses, according to the central bank. The recovering tourism sector, coupled with the increase in migrant workers in the country is also supporting property prices.

Though on a quarterly basis, property prices declined slightly by less than 1% (-6.89% when adjusted for inflation) in Q2 2023.

Malta’s house price annual change

Here are the changes in real estate prices by property type during the year to Q2 2023:

  • Apartment prices rose by 9.3% y-o-y, on average. When adjusted for inflation, prices were up by a modest 3.0%.
  • Maisonette prices increased strongly by 13.5% y-o-y in Q2 2023. When adjusted for inflation, prices actually rose by 6.9%.
  • Terraced house prices fell by 3.7% (-9.3% inflation-adjusted).
  • “Other houses”, consisting of townhouses, houses of character, and villas, experienced an average price increase of 5.6% (but fell slightly by 0.6% when adjusted for inflation).

Before the COVID-19 pandemic, property prices in Malta had been rising annually, registering a cumulative growth of 75% (62% inflation-adjusted) from 2012 to 2019.

After declining by 2.4% (-2.58% inflation-adjusted) in 2020 due to a fall in demand caused by pandemic-related restrictions, property prices in Malta bounced back again in recent years, rising by 6.94% (4.73% inflation-adjusted) in 2021 and by a more modest 2.71% (-4.26% inflation-adjusted) in 2022.

ANNUAL HOUSE PRICE CHANGE (%)
Year Nominal Inflation-adjusted
2007 0.10 -2.87
2008 -4.36 -8.90
2009 -1.42 -0.98
2010 -1.98 -5.79
2011 6.14 4.60
2012 -2.21 -4.82
2013 6.41 5.34
2014 4.73 4.33
2015 10.03 8.67
2016 13.80 12.71
2017 8.82 7.39
2018 11.85 10.48
2019 3.04 1.24
2020 -2.40 -2.58
2021 6.94 4.73
2022 2.71 -4.26
Sources: Central Bank of Malta, Global Property Guide

During 2022, the number of residential property transactions in the country fell slightly by 0.3% y-o-y to 14,331 units while the total transaction value increased 4.2% to €3.3 billion (US$3.54 billion), according to figures from NSO. Though demand in the real estate market in Malta is now showing signs of temporary slowdown, after the expiration of the temporary COVID-19 measures in September 2022, which provided for a reduced tax and duty rate of 5% and 1.5%, respectively, on the first €400,000 (US$429,460) of property transferred inter vivos. In the first three quarters of 2023, both the number and value of residential property transactions fell by 15.4% and 2.7% y-o-y, respectively.

Residential construction activity continues to increase. During 2022, the total number of approved new dwelling permits in Malta rose by 26.7% y-o-y to 9,599 units, following annual declines of 3.3% in 2021, 37.2% in 2020, and 3.1% in 2019, according to figures released by the National Statistics Office of Malta (NSO). Then in Q2 2023, new dwelling permits approved increased further by 9.5% from a year earlier.

Malta’s economy has been growing strongly in the past two years, as economic activity returns to pre-pandemic levels. The country registered real GDP growth rates of 12.3% in 2021 and 6.9% in 2022, fully offsetting the 8.1% contraction seen in 2020. The robust growth was driven by a rebound in domestic demand and export of services, benefitting from the recovery in tourism.

However, just like most countries, Malta’s economic growth is expected to slow this year. The European Commission expects the Maltese economy to grow by a more modest 3.9% this year while the International Monetary Fund (IMF) recently released a slightly lower projection of 3.8% growth.

Malta Residential Property Prices graph

Demand is slowing

During 2022, the number of residential property transactions in the country fell slightly by 0.3% y-o-y to 14,331 units, according to figures from NSO. On the other hand, the total transaction value increased 4.2% to €3.3 billion (US$3.54 billion) over the same period.

However, demand in the real estate market in Malta is now showing signs of a temporary slowdown.  In the first three quarters of 2023, both the number and value of residential property transactions fell by 15.4% and 2.7% y-o-y, respectively.

Despite this, there are wide regional variations. In the first three quarters of 2023, only Ħal Għaxaq, Ħal Kirkop, L-Imqabba, Il-Qrendi, and Il-Gudja saw an increase in the number of transactions of 6.4%.

All other clusters of localities registered an annual decline in residential property transactions. Għajnsielem and Comino, In-Nadur, Il-Qala, Ix-Xagħra, Ix-Xewkija saw the biggest y-o-y fall of 32.6% in Q1-Q3 2023, followed by Ħal Balzan, L-Iklin, Ħal Lija (-31.2%), BirżebbuÄ¡a, Ħal Safi, Iż-Å»urrieq (-28.8%), and Il-Fontana, L-Għarb, L-Għasri, Ta´ KerÄ‹em, Il-Munxar, Ir-Rabat Għawdex, San Lawrenz, Ta´ Sannat, Iż-Å»ebbuÄ¡ (-24.2%).

Transactions were also falling in other areas, including:

  • Santa LuÄ‹ija, Ħal Tarxien, Il-Fgura, Raħal Ä did, Ħal Luqa: -18.5%
  • Il-Gżira, Ta´ Xbiex, San Ä wann: -17.5%
  • Ir-Rabat, L-Imdina, Ħad-Dingli, L-Imtarfa: -16.9%
  • Marsaxlokk, Marsaskala, Iż-Å»ejtun: -16%
  • Is-Swieqi, Pembroke, San Ä iljan, Tas-Sliema: -14.5%
  • Ħal Għargħur, Il-Mosta, In-Naxxar: -14.5%
  • Ħaż-Å»ebbuÄ¡, Is-SiÄ¡Ä¡iewi, Ħ´Attard: -14%
  • Il-Mellieħa, San Pawl il-Baħar, L-ImÄ¡arr: -9.6%
  • Il-Ħamrun, Tal-Pietà, Santa Venera, L-Imsida, Birkirkara, Ħal Qormi: -6.1%
  • Valletta, Il-Furjana, Il-Marsa: -3.7%
  • Il-Birgu, L-Isla, Bormla, Il-Kalkara, Ħaż-Å»abbar, Ix-Xgħajra: -1.3%

Malta Residential Property Transactions graph

Buying property in Malta has several restrictions

Unfortunately, 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 especially designated areas such as Tigne Point, Portomaso, Cottonera, 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 on short-term leases.

Thus, buying several properties in Malta for rental income can be complicated, but for buying a summer house abroad, the restrictions are not too severe.

Becoming a resident in Malta: Residency by Investment

The government of Malta has developed a new program for non-EU citizens who would like to reside there. The new Maltese Exceptional Investor Naturalization (MEIN) program replaced the old Malta Individual Investment Programme (MIIP) in November 2020, with salient differences being:

  • Contribution: €600,000 for the standard residency route (36 months) and €750,000 for the expedited route (12 months), instead of €650,000.

For dependents, the required contribution under the new policy is €50,000.

  • Donation: the compulsory donation to an NGO has been raised to €10,000 from €5,000 previously.
  • Residential property: the threshold for purchasing a property is raised to €700,000, from €350,000. However, the threshold for rental property remains unchanged at an annual rent of €16,000. The property needs to be held for 5 years from the issuance of the certificate of citizenship.
  • Government bonds: the requirement to invest in government bonds is removed.
  • Due diligence fees: for main applicants, due diligence fees increased to €15,000 from €7,500; for dependents, they also increased to €10,000 from €3,000-€5,000.
  • Maximum age threshold: the maximum age threshold for dependents is raised to 29 from 27. Also, dependents who meet the legal definition of ‘disability’ can form part of a parent’s application, regardless of age.
  • Application for residence: all adult dependents are required to apply for residence, not just the main applicant. The non-refundable prepayment increases to €10,000, from €5,000 previously. There is also a €5,000 fee for the main applicant.

Under the MEIN, the number of citizenship certificates issued to principal applicants (i.e., excluding dependents) is capped at 400 every year, and 1,500 for the duration of the policy.

Residential construction activity improving

During 2022, the total number of approved new dwelling permits in Malta rose by 26.7% y-o-y to 9,599 units, following annual declines of 3.3% in 2021, 37.2% in 2020, and 3.1% in 2019, according to figures released by the National Statistics Office of Malta (NSO).

By property type:

  • Apartment permits, which accounted for more than 86% of the total dwelling permits approved, increased 28.4% y-o-y to 8,280 units in 2022, after falling by 4.2% in the previous year.
  • Maisonette permits rose by 23.3% y-o-y to 910 units during 2022, following a slight increase of 1.5% in the prior year.
  • Terraced house permits were up 14.8% y-o-y to 333 units last year, following a decline of 3% in 2021.
  • For other types of houses, permits fell by 23.2% y-o-y to just 76 units in 2022.

Malta Development Permits for Dwellings Annual Change graph

By district:

  • In the Northern district, new dwelling permits approved rose by 17.3% y-o-y to 1,613 units in 2022.
  • In Northern Harbour, permits increased 24.5% y-o-y to 2,376 units.
  • In the South Eastern region, permits increased strongly by 32.9% y-o-y to 1,473 units.
  • In the Southern Harbour, dwelling permits approved were up by 7.4% y-o-y to 1,106 units last year.
  • In the Western part, dwelling permits were up strongly by 39.7% y-o-y to 1,066 units.
  • In Gozo and Comino, dwelling permits rose by 35.5% y-o-y to 1,889 units.

Residential construction activity continues to rise this year. In Q2 2023, there were 2,453 new dwelling permits approved in Malta, up by 9.5% from the same period last year, according to NSO. Apartments accounted for nearly 71% of the total number of approved new dwellings during the period.

Malta Number of Dwelling Units with Development Permits graph

Mortgage interest rates remain more or less steady, despite rising ECB repo rate

Mortgage interest rates in Malta remain low, despite the ECB repo rate’s recent rate hikes to counter inflationary pressures. In September 2023, the average interest rate on new housing loans was 1.92%, almost unchanged from 1.98% in the previous year and 1.94% two years ago, according to the European Central Bank (ECB). Over the same period:

By initial rate fixation (IRF):

  • Floating rate and IRF of up to 1 year: 2.53% in September 2023, up from 1.8% in the same period last year and 1.84% two years earlier
  • IRF of over 1 and up to 5 years: 1.52%, sharply down from 2.37% in September 2022 and 2.17% in September 2021
  • Over 5 years: 1.47%, sharply down from 2.37% in the previous year and 2.17% two years ago

For outstanding housing loans, the average interest rate stood at 2.69% in September 2023, slightly down from 2.76% a year earlier and 2.83% two years ago.

By maturity:

  • Up to 1 year: 4.95% in September 2023, sharply down from 7.34% in September 2022 and 7.2% in September 2021
  • Over 1 and up to 5 years: 4.51% in September 2023, slightly up from 4.25% in the previous year and 4.13% two years earlier
  • Over 5 years: 2.69%, slightly down from 2.74% a year earlier and 2.82% two years ago

Malta Interest Rates for Outstanding Housing Loans graph

Housing loan interest rates in Malta have followed the ECB repo rate movements in the past. Housing loan rates fell sharply from late 2008, following ECB rate cuts. When the ECB cut its base rate to 0% in March 2016, where it remained there until the first half of 2022, housing loan rates in Malta also stabilized at around 3%.

However, despite the successive rate hikes implemented by the ECB in recent months to rein in soaring inflation in the region, interest rates on housing loans in Malta have surprisingly remained more or less steady. In September 2023, the ECB repo rate reached 4.5%, after ten consecutive rate hikes.

Malta Mortgage and Interest Rates graph

The mortgage market continues to grow

Housing loans grew by an average of 8.1% annually from 2010 to 2020, a slowdown from annual average growth of almost 13% in 2006-2009. Housing loan growth accelerated again to nearly 11% in 2021 and almost 10% in 2022.

In September, total housing loans outstanding rose further by 7.1% y-o-y to €7.46 billion (US$8.01 billion).

The median loan-to-value ratio is now 80%, according to EMF’s Hypostat 2023 report.

Malta’s mortgage market is dominated by two major banks – Bank of Valletta plc and HSBC Bank Malta plc.

“Mortgage loans are mainly provided by the core domestic banks (largest 6 banks, whose business is almost exclusively undertaken with local residents), predominantly Bank of Valletta plc and HSBC Bank Malta plc, which account for almost 70% of the domestic retail market (as a percentage of total deposits held by the core domestic banks),” said the Hypostat report.

The size of Malta’s mortgage market has stabilized to more than 40% of GDP in the past three years, up from 38.3% of GDP in 2019 and 29.5% of GDP in 2005, thanks to low and stable interest rates.

Malta Housing Loans Outstanding graph

Rental yields are on the lower side

Gross rental yields in Malta are low, at around 3.66% in Q2 2023, according to a Global Property Guide research conducted in July 2023.

The highest-yielding areas for apartments are St. Paul’s Bay, St. Julian’s, and Swieqi, with gross rental yields averaging 4% or more.

In other areas such as Valletta, Mellieha, Qawra, and Sliema, yields do not exceed 4%.

Round-trip transaction costs are rather high in Malta.

Free market rents rising strongly; tourist arrivals continue to recover

The residential rental market continued to recover from the trough reached in Q4 2020 during the onset of the COVID-19 pandemic, with advertised residential rents rising by double-digit figures both in 2021 and 2022. Then in the first quarter of 2023, rents increased between 14.5% and 15.6% from a year earlier, buoyed by the return of tourists and foreign expat workers, according to the Central Bank of Malta’s Quarterly Review Q3 2023.

The total number of foreign workers in Malta increased strongly by 26.9% y-o-y to a record 96,970 people in 2022, according to the Housing Authority.

Malta Number of Foreign Workers graph

“The annual rate of change of advertised rents collected from internet sources increased in the first quarter of 2023 compared with the previous quarter. The range of estimates from various methods indicate that rents have increased at annual rates of between 14.5% and 15.6% in the quarter under review,” said the Central Bank of Malta.

“Furthermore, the level of advertised rents remained around 14% above the pre-pandemic level, estimated in the final quarter of 2019,” the central bank added.

By the end-2022, active registered rental contracts in Malta stood at 47,879, up by 24% from a year earlier, according to a 2023 report released by the Housing Authority. About 95% of active contracts are for long-term leases (i.e. duration of at least one year).

However, Malta’s rental market has a peculiar composition – only 10% of rental properties are rented at market prices, the rest being in the subsidized sector.

Most Maltese opt to own property rather than rent, with owner-occupancy rates at about 82.6% in 2022, up from 81.9% in the previous year and from 68% in 1995, according to the European Mortgage Federation’s Hypostat 2023 report.

“In recent years, various factors contributed to the attractiveness of property investment such as an increase in disposable income; the influx of foreign workers which increased demand for property and a growth in tourism which led to a strong demand for private accommodation,” said the Hypostat report.

Before the pandemic, rents had been rising strongly in Malta, thanks to the increasing number of foreign workers, who mostly live in rented accommodation. Tourism, which increased by 10% annually from 2013 to 2019, and the introduction of the MIIP in 2013, increased rental demand further. However, in 2020, tourist arrivals plummeted by 76.1% to just 658,600 people, according to the Central Bank of Malta. With a lack of demand, rental rates dropped by double-digit figures.

With the easing of pandemic-related restrictions, the tourism sector started to show improvements in 2021, with the total number of tourist arrivals rising by 47% y-o-y to 968,100 people. In 2022, tourist arrivals reached 2.28 million, more than double the prior year’s figure but still below the record 2.75 million tourists who visited Malta in 2019.

Then in the first eight months of 2023, tourist arrivals totaled nearly 2 million visitors, up by 33.5% from the same period last year.

Italians accounted for 19.6% of total tourist arrivals in Malta in the first eight months of 2023, followed by Britons (17.7%), French (10.4%), and Germany (6.8%). Non-EU citizens represented about 31.4% of total arrivals.

Malta Tourist Arrivals by thousands graph

Vacancy rate remains high

Paradoxically, over the past decade Malta’s residential vacancy rate has remained high, despite continuously rising house prices. The vacancy rate now stands at 18% of total dwelling stock - one of the highest in the European Union. Many say this is due to Malta’s rent control system. To protect tenants, private rental market rents are frozen and landlords are prohibited from evicting tenants unless a suitable alternative accommodation is offered. To increase the rent the landlord needs the approval of the Rent Regulation Board, which is hardly ever granted.

To address the issue, the Rent Reform Law came into force on January 1, 2010. The new law established an annual minimum rent and was intended to gradually stop the inheritance of rented properties so that they revert to their owners.

Moreover, to address another source of vacant properties, the government recently reduced from 10 years to 3 years the period after which an inherited property in dispute can be sold, provided that most (but not all) heirs agree on the sale price.

To further encourage the use of vacant properties, the government reduced the stamp duty on transfers of properties within an urban conservation area from 5% to 2.5% in 2016. Also, transfers of restored properties within an urban conservation area will now have a lower final withholding tax, reduced from 8% to 5%. In 2017, the government also lowered the stamp duty on properties acquired in Gozo from 5% to 2%.

Yet according to others, vacant properties don’t pose a serious problem. This is the view of Malta Developers’ Association president Sandro Chetcuti. “Just drop this about vacant properties,” said Chetcuti. “There is no problem with this. There are around 55,000 properties and more than half of these are second homes or summer residences while half of the remainder are either dilapidated or being fought over by heirs. The rest are on the market but they are simply overpriced and cannot sell.”

In 2018, the Housing Authority introduced the Skema Nikru Biex Nassistu program, encouraging private owners of one, two, or three-bedroom properties at least 30 years old that have been vacant for a year or more to enter into a lease agreement with the Authority for ten years.

The vacant property owner will receive a maximum grant of €25,000 to refurbish the property. The Housing Authority will then rent the property from the owner in a fully finished state, with the rental based on a set of criteria. During the 10-year period, the owner will receive constant rental payments, with a 2% increase annually. Moreover, the owner is exempted from paying tax on the dwelling rented.

Malta’s economic growth to slow, but the labor market remains strong

Malta’s economy has been growing strongly in the past two years, as economic activity returns to pre-pandemic levels. The country registered real GDP growth rates of 12.3% in 2021 and 6.9% in 2022, fully offsetting the 8.1% contraction seen in 2020. The robust growth was driven by a rebound in domestic demand and export of services, benefitting from the recovery in tourism.

Malta GDP Growth and Inflation graph

“Supported by strong growth in private consumption and investment, real GDP growth reached 6.9% in 2022,” said the European Commission. “Growth also benefited from the strong performance of the services sectors in general. Tourism in 2022 rebounded quickly and above earlier expectations, both in terms of total number of visitors and tourism expenditures.”

However, just like most countries, Malta’s economic growth is expected to slow this year. The European Commission expects the Maltese economy to grow by a more modest 3.9% this year while the International Monetary Fund (IMF) recently released a slightly lower projection of 3.8% growth.

“In 2023, real GDP is forecast to grow at a slower pace, by 3.9%, as high inflation limits private consumption and the positive impulse from tourism, following the post-pandemic re-opening, moderates,” the European Commission noted.

Before the pandemic, the economy had been growing strongly, with an annual average growth of 6.2% from 2012 to 2019, based on IMF figures.

The budget deficit is expected to fall to about 4.8% of GDP this year and further to 3.5% of GDP in 2024, from 5.8% in 2022, 7.8% in 2021 and 9.7% in 2020, according to the central bank projections. Despite this, Malta’s debt is still projected to grow slightly to 54% of GDP this year and to 54.5% of GDP in 2024, from 53.4% of GDP in 2022.

In September 2023, annual inflation eased to an 18-month low of 4.9%, from 5% in August and 5.6% in July, according to the NSO. Inflation averaged 2.9% in 2008-12 and 1.1% in 2013-21, before surging to 6.1% in 2022.

The labor market remains fundamentally strong. Unemployment stood at 2.5% in Q2 2023, down from 2.9% in the previous year and one of the lowest in the EU, according to the Central Bank of Malta.

The total number of unemployed dropped to 7,600 people in Q2 2023, from 8,400 a year earlier and 9,400 two years ago.

Malta Unemployment Rate graph

Sources: