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.

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%), Birżebbuġa, Ħal Safi, Iż-Żurrieq (-28.8%), and Il-Fontana, L-Għarb, L-Għasri, Ta´ Kerċem, Il-Munxar, Ir-Rabat Għawdex, San Lawrenz, Ta´ Sannat, Iż-Żebbuġ (-24.2%).

Transactions were also falling in other areas, including:

• Santa Luċija, Ħal Tarxien, Il-Fgura, Raħal Ġdid, Ħal Luqa: -18.5%
• Il-Gżira, Ta´ Xbiex, San Ġwann: -17.5%
• Ir-Rabat, L-Imdina, Ħad-Dingli, L-Imtarfa: -16.9%
• Marsaxlokk, Marsaskala, Iż-Żejtun: -16%
• Is-Swieqi, Pembroke, San Ġiljan, Tas-Sliema: -14.5%
• Ħal Għargħur, Il-Mosta, In-Naxxar: -14.5%
• Ħaż-Żebbuġ, Is-Siġġiewi, Ħ´Attard: -14%
• Il-Mellieħa, San Pawl il-Baħar, L-Imġarr: -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-Żabbar, Ix-Xgħajra: -1.3%

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.

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.

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