Malta's residential property prices continue to grow, albeit at a slower pace, amidst increasing transactions supported by fundamentally robust domestic demand, record-high tourist arrivals, and a surge in the number of foreign workers in the country.

Table of Contents

• Housing Market Snapshot
• Demand Highlights
• Supply Highlights
• Rental Market
• Mortgage Market
• Socio-Economic Context

Housing Market Snapshot

During the year to Q2 2024, the nationwide property price index rose by a modest 3.38% (1.17% inflation-adjusted), following year-on-year increases of 6.72% in Q1 2024, 7.54% in Q4 2023, 6.82% in Q3 2024, 8.3% in Q2 2023, and 10.51% in Q1 2023, based on figures from the Central Bank of Malta. When adjusted for inflation, property prices were up only slightly by 1.17% over the same period.

"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 European Mortgage Federation (EMF) in its 2024 Hypostat report. "The Malta Citizenship by Investment scheme, which allows foreigners to acquire Maltese citizenship, subject to certain conditions, also played a role in generating demand for local properties."

Though quarter-on-quarter, nationwide property prices declined by 4.06% (-9.41% inflation-adjusted) in Q2 2024, in contrast to the q-o-q increase of 6.52% in the prior quarter.

Malta's house price annual change

Here are the changes in real estate prices by property type during the year to Q2 2024:

• Apartment prices rose by 8.8% y-o-y, on average, following an annual increase of 9.3% in Q2 2023. When adjusted for inflation, prices were up by 6.5%.
• Maisonette prices increased by a meager 1.6% y-o-y in Q2 2024, after strong growth of 13.5% in the same period last year. When adjusted for inflation, prices actually fell slightly by 0.6%.
• Terraced house prices rose by 3.2% (1% inflation-adjusted) in Q2 2024 from a year earlier, an improvement from a y-o-y fall of 3.7% in Q2 2023.
• "Other houses", consisting of townhouses, houses of character, and villas, experienced an average price increase of 6.4% y-o-y in Q2 2024, following a growth of 5.6% a year earlier. In real terms, prices were up by 4.2%.

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, by a more modest 2.71% (-4.26% inflation-adjusted) in 2022, and by another 7.54% (3.71% inflation-adjusted) in 2023.

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 in its Q3 2024 Quarterly Review. The recovering tourism sector, coupled with the increase in migrant workers in the country is also supporting property prices.

After falling by 15.3% last year, demand in the residential real estate market is now picking up again. In Q3 2024, both the number and value of residential property transactions increased by 6% and 4.3%, respectively, as compared to a year earlier. In fact, in the first three quarters of 2024, the number of residential property transactions rose by 4.5% y-o-y to 9,342 units while transaction value was up by 6.3% to €2.5 billion (US$2.68 billion).

Yet residential construction activity remains weak. During 2023, the total number of approved new dwelling permits in Malta fell by 15.5% y-o-y to 8,112 units, following a strong increase of 26.7% in 2022, and 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).

In the first quarter of 2024, the total number of dwellings for which permits were issued increased slightly by 2.2% to 2,596 units as compared to the same period last year.

Malta's economy has been growing strongly in the past three years, as economic activity returns to pre-pandemic levels. The country registered real GDP growth rates of 13.5% in 2021, 4.1% in 2022, and 7.5% in 2023, fully offsetting the 3.5% 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.

The country registered annual real GDP growth rates of 7.6% in Q1 and 4.4% in Q2 2024, buoyed by strong consumer consumption and external trade. As a result, the European Commission expects Malta to post an economic growth of 4.6% this year and another 4.3% in 2025. The International Monetary Fund (IMF), on the other hand, released an economic forecast for the country of 5% growth this year and 4% next year.

Demand Highlights:

Demand increasing again

During 2023, the total number of residential property transactions in the country fell by 15.3% y-o-y to 12,143 units, following a slight decline of 0.3% in 2022 and a strong growth of 30.1% in 2021, according to figures from NSO. Likewise, the total transaction value declined by 3% y-o-y to €3.2 billion (US$3.43 billion) over the same period.

Last year's decline was partly due to 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$428,740) of property transferred inter vivos.

Fortunately, demand in the residential real estate market is now picking up again. In Q3 2024, both the number and value of residential property transactions increased by 6% and 4.3%, respectively, as compared to a year earlier.

In fact, in the first three quarters of 2024, the number of residential property transactions rose by 4.5% y-o-y to 9,342 units while transaction value was up by 6.3% to €2.5 billion (US$2.68 billion).

Despite this, there are wide regional variations. In September 2024, the localities of Santa Luċija, Ħal Tarxien, Il-Fgura, Raħal Ġdid, and Ħal Luqa saw the biggest y-o-y increase in the number of transactions of a whopping 82.6%. It was followed by the localities of Ir-Rabat, L-Imdina, Ħad-Dingli, and L-Imtarfa (47.4%), Il-Mellieħa, San Pawl Il-Baħar, and L-Imġarr (45.2%), and Birżebbuġa, Ħal Safi, and Iż-Żurrieq (44.4%).

Transactions were also increasing in other areas, including:

• Ħal Għargħur, Il-Mosta, In-Naxxar: 31.6%
• Marsaxlokk, Marsaskala, Iż-Żejtun: 27.9%
• Il-Ħamrun, Tal-Pietà, Santa Venera, L-Imsida, Birkirkara, Ħal Qormi: 24.1%
• Is-Swieqi, Pembroke, San Ġiljan, Tas-Sliema: 21.8%
• Il-Gżira, Ta' Xbiex, San Ġwann: 18.2%
• Valletta, Il-Furjana, Il-Marsa: 9.1%
• Għajnsielem and Comino, In-Nadur, Il-Qala, Ix-Xagħra, Ix-Xewkija: 1.9%

In contrast, the localities of Ħal Balzan, L-Iklin, and Ħal Lija saw the biggest y-o-y decline in the number of residential property transactions in September 2024, of 57.9%.

Other localities that registered falling transactions were:

• Il-Birgu, L-Isla, Bormla, Il-Kalkara, Ħaż-Żabbar, Ix-Xgħajra: -9.5%
• Ħal Għaxaq, Ħal Kirkop, L-Imqabba, Il-Qrendi, Il-Gudja: -5.9%
• Ħaż-Żebbuġ, Is-Siġġiewi, Ħ'Attard: -5.6%
• Il-Fontana, L-Għarb, L-Għasri, Ta' Kerċem, Il-Munxar, Ir-Rabat Għawdex, San Lawrenz, Ta' Sannat, Iż-Żebbuġ: -3.4%

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 specially 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.

Supply Highlights:

Residential construction activity weakening again

During 2023, the total number of approved new dwelling permits in Malta fell by 15.5% y-o-y to 8,112 units, following a strong increase of 26.7% in 2022, and 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 nearly 87% of the total dwelling permits approved, dropped 15.1% y-o-y to 7,026 units in 2023, after increasing by 28.4% in 2022 and falling by 4.2% in 2021.
• Maisonette permits declined by 21.8% y-o-y to 712 units during 2023, following annual increases of 23.3% in 2022 and 1.5% in 2021.
• Terraced house permits were down by 12.3% y-o-y to 292 units last year, following an increase of 14.8% in 2022 and a decline of 3% in 2021.
• For other types of houses, permits rose by 7.9% y-o-y to 82 units in 2023, after a fall of 23.2% in the prior year.

In the first quarter of 2024, the total number of dwellings for which permits were issued increased slightly by 2.2% to 2,596 units as compared to the same period last year.

Rental Market:

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 reached new record-high

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 from 2021 to 2023. Then in the first quarter of 2024, rents increased between 13.3% and 18.4% 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 2024.

"The annual rate of change of advertised rents collected by the Bank from internet sources edged up in the first quarter of 2024," said the central bank. "The range of estimates from various methods indicate that rents have increased at annual rates of between 13.3% and 18.4% in the quarter under review."

The total number of foreign workers in Malta increased strongly by more than 19% y-o-y to a new record 115,721 people in 2023. This followed annual increases in the number of foreign workers in the country of 26.9% in 2022, 8.6% in 2021, 3.4% in 2020 and 22.3% in 2019.

Foreign workers, particularly third-country nationals (TCN) and those from other EU countries accounted for more than 90% of tenants in Malta.

"According to the survey results, only 10% of tenants are Maltese, with the shares of EU and TCN tenants standing at 17% and 74%, respectively," said the central bank in its Q3 2024 Quarterly Review.

Active registered rental contracts in Malta stood at 47,879 by the beginning of 2023, 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. However, in 2023, the owner-occupancy rate in the country fell to 74.7%, down from 82.6% in 2022 and 81.9% two years ago. However, it still remains far higher than the 68% recorded in 1995. It is also far higher than the EU-27 average of 69.2% in 2023, according to the European Mortgage Federation's Hypostat 2024 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.

During 2023, tourist arrivals surged by another 30.1% to reach a new record-high of 2.98 million visitors. It is now more than 8% higher than the pre-pandemic peak of 2.75 million tourists seen in 2019.

Then in the first eight months of 2024, tourist arrivals totaled more than 2.4 million visitors, up strongly by 21.1% from the same period last year.

Britons accounted for 19.2% of total tourist arrivals in Malta in the first eight months of 2024, followed by Italians (18.7%), French (9%), and Germans (6.6%). Non-EU citizens represented about 31.8% of total arrivals over the same period.

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 Skeme 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.

Mortgage Market:

Mortgage interest rates remain more or less steady

Mortgage interest rates in Malta remain low, as the ECB cut its key rates in recent months amidst easing inflationary pressures. In September 2024, the average interest rate on new housing loans was 1.82%, slightly down from 1.92% in the previous year and 1.98% two years ago, according to the European Central Bank (ECB).

Malta's mortgage loan interest rates:

By initial rate fixation (IRF):

• Floating rate and IRF of up to 1 year: 2.58% in September 2024, up from 2.53% in the same period last year and 1.84% two years earlier
• IRF of over 1 and up to 5 years: 1.33%, down from 1.52% in September 2023 and 2.37% in September 2022

For outstanding housing loans, the average interest rate stood at 2.59% in September 2024, slightly down from 2.69% in the same period last year and 2.76% two years ago.

By maturity:

• Up to 1 year: 0.92% in September 2024, sharply down from 4.95% in September 2023 and 7.34% in September 2022
• Over 1 and up to 5 years: 4.65%, up from 4.51% in the previous year and 4.25% two years earlier
• Over 5 years: 2.59%, down from 2.69% a year earlier and 2.74% two years ago

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 the past two years to rein in soaring inflation in the region, interest rates on housing loans in Malta have surprisingly remained more or less steady during the period. Even when the ECB implemented a monetary policy shift in recent months, cutting the ECB repo rate three times from June 2024 to October 2024, mortgage interest rates in Malta hardly moved, except for the short-term loans.

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 continued in recent years, registering a nearly 11% increase in 2021, 10.4% in 2022, and 7.9% in 2023.

In September 2024, total housing loans outstanding in Malta rose further by 9.6% y-o-y to €8.27 billion (US$8.86 billion).

Accordingly, major domestic banks extended more than 90% of the credit to households and individuals, including mortgage loans.

However, the median loan-to-value ratio fell slightly to 76.5% last year, from 80% in the prior year, according to EMF's Hypostat 2024 report.

The core domestic banks extended well over 90% of the credit to households and individuals (which includes mortgage loans). The median loan-to-value ratio fell slightly to 76.5%.

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, predominantly Bank of Valletta plc and HSBC Bank Malta plc, with 66% of the domestic retail market (based on percentage of deposits). These latter banks rely mainly on resident deposits for funding, which in 2023 increased to almost EUR 28 bn," said the 2024 Hypostat report.

The size of Malta's mortgage market has stabilized to about 40% of GDP from 2009 to 2023, thanks to low and stable interest rates.

Socio-Economic Context:

Malta's robust economic growth, strong labor market

Malta's economy has been growing strongly in the past three years, as economic activity returns to pre-pandemic levels. The country registered real GDP growth rates of 13.5% in 2021, 4.1% in 2022, and 7.5% in 2023, fully offsetting the 3.5% 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 has experienced an impressive recovery from the pandemic and demonstrated resilience to shocks resulting from Russia's invasion of Ukraine," said the International Monetary Fund (IMF).

The country registered annual real GDP growth rates of 7.6% in Q1 and 4.4% in Q2 2024, buoyed by strong consumer consumption and external trade.

"The Maltese economy continues to grow robustly driven by strong exports and domestic demand. Tourism flows bounced back to well above pre-pandemic levels and the strong inflow of workers is boosting domestic demand," confirms the European Commission.

The European Commission expects Malta to post an economic growth of 4.6% this year and another 4.3% in 2025. The IMF, on the other hand, released an economic forecast for the country of 5% growth this year and 4% next year.

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 government's public finances continue to improve. The budget deficit is expected to fall to about 4.1% of GDP this year and further to 3.6% of GDP in 2025, from 4.9% in 2023, 5.2% in 2022, 7% in 2021, and 8.7% in 2020, according to the central bank projections. Despite this, Malta's debt is still projected to grow slightly to 52.5% of GDP this year and to 53.5% of GDP in 2025, from 50.4% of GDP last year.

Inflationary pressures are easing. In September 2024, nationwide inflation inched down to 2.1%, down from 2.4% in the previous month and 4.9% in the same period last year, according to the NSO. In fact, it was the lowest level seen since October 2021.

Inflation averaged 2.9% in 2008-12 and 1.1% in 2013-21, before surging to 6.1% in 2022. It remained elevated at 5.6% in 2023.

The labor market remains fundamentally strong. Unemployment stood at 3.2% in Q2 2024, down from 3.3% in the previous quarter and 3.8% a year earlier, according to the Central Bank of Malta. The jobless rate for males was 3.4% while it was 2.9% for females.

The total number of unemployed dropped to 10,500 people in Q2 2024, from 11,700 a year earlier and 10,800 two years ago.

The country's unemployment rate is expected to fall slightly to an average of 3% this year and to 2.9% in 2025, from 3.1% last year.

"The unemployment rate was revised upwards from 2.9% to 3.5% in 2022 due to an updated demographic survey. In 2023, the unemployment rate fell to 3.1% and it is expected to drop marginally to 3% and 2.9% in 2024 and 2025," said the European Commission. "Nominal wages were, however, still growing at relatively weak rates in 2023 as employment expanded in the low wage sectors, resulting in negative real wage growth per head." 

Sources:

1. Real economy indicators (Central Bank of Malta): https://www.centralbankmalta.org/
2. Residential Property Transactions Q4/2023 (National Statistics Office): https://nso.gov.mt/
3. Everything you need to know about the new Maltese Exceptional Investor Naturalization (MEIN) regulations (IMI Daily): https://www.imidaily.com/
4. Interest Rates and Other Key Financial Market Rates (Central Bank of Malta): https://www.centralbankmalta.org/
5. Monetary policy decisions (European Central Bank): https://www.ecb.europa.eu/.
6. Hypostat 2023 (European Mortgage Federation): https://hypo.org/
7. Hypostat 2024 (European Mortgage Federation): https://hypo.org/
8. Gross rental yields in Malta: Valletta and 6 other cities (Global Property Guide): https://www.globalpropertyguide.com/
9. Foreign workers now exceed 115,000 (Voice of the Workers Weekly): http://weekly.uhm.org.mt/
10. Malta set a new record for foreign worker permits in 2023 (The Shift News): https://theshiftnews.com/
11. The Private Rental Market in Malta (Malta Housing Authority): https://housingauthority.gov.mt/
12. Stamp duty measures announced in the Budget Speech for 2017 (ACT Advisory Services): https://www.act.com.mt/
13. 'No problem' with vacant properties, says developers' rep (Times of Malta): https://timesofmalta.com/
14. Skema Nikru Biex Nassistu (Malta Housing Authority): https://housingauthority.gov.mt/
15. Nikru biex Nassistu (Malta Housing Authority): https://housingauthority.gov.mt/
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