Malta's housing market remains resilient
Lalaine C. Delmendo | July 15, 2021
Quarter-on-quarter, property prices increased 0.3% (5.5% inflation-adjusted) during the latest quarter.
“…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.
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.
Rental yields seem to be rising in Malta - now around 4.4%
Malta illustrates the point that, if you are interested in a high rental income, it is worth researching carefully the difference between different areas.
In Malta, the highest yielding areas for apartments are Attard, Balzan, and Lija. By contrast Tigne Point and Valleta have relatively poor returns.
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.
Taxes are moderate to high in Malta
Rental Income: Net rental income is generally taxed at progressive rates, up to 35%.
If the nonresident elected to be part of the Individual Investor Program, gross rental income will be taxed at a flat rate of 15%.
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.
Buying costs are low to moderate in Malta
Roundtrip transaction costs ranges from 8.53% to 25.58% of property value. The buyer usually pays for the stamp duty (1% pre-paid stamp duty, and 4% remaining stamp duty). Seller paysreal estate agent commission at 1% to 5%, plus 18% VAT. The seller also pays 12% Capital Gains Tax.
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.
Law is pro-landlord in Malta, but courts are impossibly slow
Maltese rental market practice is pro-landlord.
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 government deficit rising rapidlyDuring 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.
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.