Malta: Price History

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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.

Price growth revival?

Although Malta seem very overbuilt, some believe there are reasons for optimism.

Why be optimistic about house prices in Malta?

1. Economic Growth. After four years of low or negative growth – mainly attributable to the slowdown in the electronics and tourism industries – real GDP recovered in 2005 and 2006, expanding by 3% and 2.9% respectively.
2. Ryan flights to Malta are increasing tourism.
3. The Maltese authorities plan to adopt the Euro on 1 January 2008.
4. Knight Frank, the international real estate agency, expects 12.5% Malta house price rises in 2005 (note: Knight Frank do not have an office in Malta).
5. Rental yields are quite good, at 7%.

Why be pessimistic about house prices in Malta?

1. Market overhang. There’s considerable overbuilding. A third of the property stock is second homes, 21% of all property is empty. Unless the Maltese authorities liberalize the renting and owning rules, it is hard to understand who will buy the new supply.
2. Rising interest rates. The Central Bank of Malta has raised the central intervention rate by 25 basis points to 4.25% (30 May 2007) to ensure exchange rate stability in the lead-up to the adoption of the Euro.
3. Malta has been developing at the expense of the environment, decreasing the quality of life.

According to Global Property Guide research, the average price for properties in Valetta was €1,700 per square meter (sq. m.) in 2005. The average price for properties located in Gozo was US$1,900. Our numbers are being updated, but are unlikely to change much.

“A lot of locals buy to hold on, they don’t like selling,” says Bernard Bugeja of Bernards Real Estate. “They buy two or three, and put their children in them. They also rent to expatriates from the international trading companies. And to the locals. Before, there was a problem renting to locals, because you couldn’t get them out. Now you can.”

Rents have not kept pace with house prices. “Rents have not moved up in all this period (10 years),” says Bugeja. “In fact rental values have gone down. There is an oversupply of apartments.”

Restrictions

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. The property must be used solely as a residence of the owner and his relatives.

Non-EU foreign nationals need to obtain an Acquisition of Immovable Property (AIP) Permit from the Ministry of Finance before they can buy property in Malta. The processing of the permit usually takes three months. The prospective property must be worth at least LM 30,000 (69,900) for apartments and LM 50,000 (€116,500) for other types of property.

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.

Malta - more data and information

• Malta's house prices, rents, and letting income - real data!
• How expensive are houses in Malta, compared to the rest of Europe?
• How much rent can be earned from Malta's property, compared to the rest of Europe?

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