Malta’s housing market remains resilient

Lalaine C. Delmendo | May 19, 2021

After slowing in the first half of 2020, Malta’s housing market is gaining momentum. The property price index rose by 5% during 2020 (4.8% inflation-adjusted), following rises of 2.5% in 2019, 11.9% in 2018, 8.8% in 2017, 13.8% in 2016, and 10% in 2015, according to the Central Bank of Malta (CBM). 

Quarter-on-quarter, property prices increased 0.3% (5.5% inflation-adjusted) during the latest quarter.

Malta overview annual house price change graph

“…historically the real estate market in Malta has been an important contributor to economic growth, and despite the significant economic disruption brought about by the current COVID-19 pandemic, the industry remains resilient on the back of strong consumer confidence, evidenced by the rate of real estate transactions experienced in the past months,” said David Valenzia of PwC Malta.

By property type:

  • Apartment prices rose by 6.5% on average during 2020. When adjusted for inflation, prices were up by 6.3%.
  • Terraced house prices rose by 1.6% (1.5% inflation-adjusted).
  • Maisonette prices fell by 7% y-o-y (-7.2% inflation-adjusted).
  • "Other houses", consisting of townhouses, houses of character and villas, experienced the highest price surge of around 12.4% y-o-y (12.2% inflation-adjusted) during 2020.


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 2.53 1.23
2020 4.99 4.82
Sources: Central Bank of Malta, Global Property Guide

Demand is rising again.  The number of residential transactions rose by 8.7% y-o-y in Q1 2021 to 3,2123 units, after falling by 21.2% in 2020, according to the National Statistics Office (NSO). Likewise, the value of transactions rose strongly, by 15.2% y-o-y.  This can be partly attributed to the government’s temporary COVID-19 measures providing for a reduced tax and duty rate of 5% and 1.5%, respectively, on the first €400,000 (US$483,308) of property transferred inter vivos. These temporary measure came into force in June 2020 and will end on July 2021.

Malta’s economy is projected to grow by 4.5% this year and by another 5.4% in 2022, after a sharp contraction of 9% last year, according to the European Commission.

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 on short-term leases.

Residency by investment: a new name, some changes.

A new Maltese Exceptional Investor Naturalization (MEIN) programme replaced the Malta Individual Investment Programme (MIIP) in 2020, 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 is raised to €10,000 from €5,000 previously.
  • Residential property: the threshold for purchasing a property is raised to €700,000, from €350,000. But 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, it 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 pre-payment 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) will be capped at 400 every year, and 1,500 for duration of the policy.

Malta’s housing boom and bust: a brief history

Malta’s property market enjoyed strong growth from 2000 to 2007, with the house price index rising 78.9% (53.4% inflation-adjusted). Malta’s housing boom peaked in the second quarter of Q2 2004 with an amazing 36.73% y-o-y house price rise. The boom was set off by low interest rates, which had an extraordinarily strong effect, boosting residential mortgage debt from only 19.6% of GDP in 2002, to 34.6% of GDP in 2006 (it now stands at 45.8% of GDP).

A supporting factor was the Investment Registration Scheme, a tax amnesty for Maltese residents with overseas assets, effective from 2001 to 2005.

Malta residential property prices

Then, like other European countries, Malta was hit by the global financial crisis of 2008. Dependent on foreign trade and tourism, Malta’s economy contracted by 1.1% in 2009 – the first decline since 2001, and from 2008 to 2010, house prices fell by 8.8% (-15.2% inflation-adjusted).  After a short-lived recovery in 2011, house prices fell again by 2.2% (-5.2% inflation-adjusted) in 2012.

House prices then recovered strongly in 2013, mainly due to government’s launch of new property-related measures, particularly the Malta Individual Investor Programme (MIIP). House prices have risen continuously since then.

Malta’s buoyant house price rises over the last eight years has been supported by:

  • strong economic growth, averaging 6.5% annually from 2013 to 2019;
  • the introduction of the MIIP in 2013, targeting high net worth individuals;
  • a low-interest rate environment;
  • buoyant disposable income; and
  • a rising number of foreign workers in the country.

Prices were also boosted by the exemption of first-time property buyers from a 3.5% stamp duty on the first €150,000 of a new property’s value. In 2018, second-time buyers became eligible for a stamp duty refund of up to €3,000 on replacing their current residential homes, but not if they own any other property, or are upgrading to a luxury villa. Homeowners with disabilities can avail of a higher stamp duty refund of up to €5,000.

Then in June 2020, a temporary COVID-19 relief measure was introduced, providing for a reduced tax and duty rate of 5% and 1.5%, respectively, on the first €400,000 (US$483,308) of an immovable property transfer inter vivos. The measure will run until end-July 2021.

Demand recovering strongly

During the year to Q1 2021, Cottonera saw the biggest surge in the number of transactions of 78.4%, followed by the region consisting of Mdina, Ħad-Dingli, Rabat, Mtarfa and Mġarr (64.5%); Ħal Qormi, Ħaż-Żebbuġ and Siġġiewi (37.8%); Mellieħa and St Paul´s Bay (36.7%); Fgura, Paola, Santa Luċija, Ħal Tarxien (30.9%); Ħal Luqa, Gudja, Ħal Għaxaq, Ħal Kirkop, Mqabba, Qrendi, Ħal Safi, and Żurrieq (18.7%); Mosta and Naxxar (18.6%).

Malta residential property transactions

In contrast, residential property transactions continued to fall in Gozo, with an 8.1% y-o-y decline in Q1 2021; Pembroke, St Julian´s, Tas-Sliema, Swieqi, and Ħal Għargħur (-7.3%); Ħaż-Żabbar, Xgħajra, Żejtun, Birżebbuġa, Marsaskala, and Marsaxlokk (-5.1%); Ħ´Attard, Ħal Balzan, Iklin, and Ħal Lija (-5.1%); and, Birkirkara, Gżira, Msida, Ta´ Xbiex, and San Ġwann (-4.4%).

The region consisting of Valletta, Floriana, Marsa, Ħamrun, Tal-Pietà, and Santa Venera saw no change in sales transactions.

Residential construction down sharply

In 2020, the grant of permits to develop new dwelling units fell by more than 37% y-o-y to just 7,837 units, according to the Central Bank of Malta, mainly due to pandemic-related restrictions.

  • Apartment permits (86% of the total) plunged by 37.2% y-o-y to 6,735 units in 2020.
  • Maisonette permits fell by 40.7% y-o-y to 727 units.
  • Terraced houses permits dropped 25.6% y-o-y to 299 units.
  • For other houses, consisting of townhouses, houses of character and villas, permits fell by 42% y-o-y to just 76 units.

Malta development permits

Low mortgage rates

The average interest rate on outstanding housing loans fell slightly to 2.95% in February 2021, from 3.02% the previous year, and 3.08% two years ago.

By maturity:

  • Up to 1 year: 7.08%, up from 6.09% a year ago and 7.08% two years earlier
  • 1-5 years: 4.06%, from 3.96% in February 2020 and 4.05% in February 2019
  • Over 5 years: 2.94%, down from 3% a year earlier and 3.06% two years ago

Malta mortgage interest rates graph

Housing loan interest rates in Malta fell sharply from late-2008, following ECB rate cuts. In March 2016 the ECB cut its base rate to 0% where it remained since.

Mortgage market continues to grow, despite pandemic

Malta’s mortgage market grew strongly to 45.8% of GDP during 2020, up from 40.3% of GDP in 2019, thanks to low and stable interest rates. In February 2021, total housing loans outstanding rose strongly by 7% y-o-y to €5.92 billion (US$7.15 billion).

Housing loans grew by an average of 8.1% annually from 2010 to 2020, a slowdown from an annual average growth of almost 13% in 2006-09.

The average loan-to-value ratio is now 76%, according to EMF’s Hypostat 2020 report.

Malta housing loans

Malta’s mortgage market is dominated by Bank of Valletta plc and HSBC Bank Malta plc, which account for 71% of the domestic retail market.

Moderate rental yields

Rental yields in Malta are moderate, at around 4.4% for apartments in favourite expatriate areas such as St Paul’s Bay, Sliema, St. Julian’s, and Swieqi, according to Global Property Guide research.  According to Pwc’s Malta Real Estate Survey 2021 St Paul’s Bay is the most sought after rental property market in Malta in 2020, which is unsurprising given that St Paul’s Bay is the country’s most populous locality. Apartment prices in popular expat spots average from around €3,200 to €4,500 per sq. m.

Free market rents falling sharply

Free market residential rents fell last year by double-digits, due to the decline in tourist arrivals and foreign expat workers amidst the pandemic.

“The proportion of properties registering discounts in their advertised rents….rose dramatically between March and April 2020…from 53.7% to 86.2%, respectively,” said the Central Bank of Malta in its 2021 Long-term Housing Rentals report.

Malta tourist arrivals

However overall, rents increased by 1% in Q1 2021 from a year earlier, due to the peculiar composition of Malta’s rental market – 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 currently at about 80%, up from 68% in 1995, according to the European Mortgage Federation’s Hypostat 2020 report.

Before the pandemic, rents had been rising strongly in Malta, buoyed by 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 during 2020 tourist arrivals plummeted by 76.1% to just 658,600 people, according to the Central Bank of Malta.

UK nationals accounted for 20.6% of total tourist arrivals in Malta last year, followed by Italy (14.3%), Germany (11%), and France (10.8%). Non-EU citizens represented almost 32% of total arrivals.

Vacancy rate remains stubbornly 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 in 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.

Malta development permits annual change

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 bedroomed properties at least 30 years old which 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 payment, with a 2% increase annually.

Malta’s government deficit rising rapidly

During 2020, Malta’s economy contracted by a huge 9% from a year earlier, in sharp contrast to 5.5% growth the previous year.

“Limitations on air traffic, tourism and social activities were mainly to blame,” said the European Commission.

Yet the EC is optimistic that the Maltese economy will start to recover this year, projecting a real GDP growth of 4.5% and 5.4% in 2022.

“The expected rollout of vaccinations in 2021 and a gradual easing of restrictions in the EU should set the tourism sector back on the path to recovery and re-invigorate domestic demand,” the EC noted.

Malta gdp inflation

Before the pandemic, the economy had been growing strongly, with an annual average growth of 6.2% from 2012 t0 2019, according to the International Monetary Fund (IMF).

The budget deficit shot up to €1.3 billion (US$1.6 billion) last year, or over 10% of the country’s GDP, according to the NSO. The shortfall is expected to rise further to €1.6 billion (US$1.9 billion) this year, i.e. about 12% of the country’s GDP, as the government continues to provide aid to the ailing economy.

Malta’s debt stood at €6.9 billion (US$8.3 billion) last year – equivalent to 54.3% of GDP - a sharp increase from just 42% of GDP in 2019.

Unemployment was 4.4% in 2020, up from 3.5% a year earlier but still one of the lowest in the EU.

In March 2021, inflation was 0.1%, unchanged from the previous month and the lowest reading since December 2009, mainly due to subdued energy prices and lower prices in the services sector, according to the NSO. Inflation averaged 1.1% in 2013-20, a decline from an annual average of 2.9% in 2008-12.


Old Entries


Be the first to comment on this article!

Login or Register to submit a comment!
In order to promote open and spam-free conversations, Global Property Guide moderates commetns on all articles. You can expect that your comment will be published within 24 hours.


Get GPG fortnightly newsletters delivered to your inbox

A quick summary of global real estate trends.