House prices in Malta continue to rise
Last Updated: January 23, 2015
Most property types experienced price hikes:
- Apartments had a 7.17% price increase during the year to Q3 2014. Prices actually went up by 6.44%, when adjusted to inflation.
- Terraced houses rose by 5.89% (5.18% inflation-adjusted) y-o-y in Q3 2014.
- Maisonettes, on the other hand, had a slight price drop of 0.42% (-1.09% inflation-adjusted) y-o-y in Q3 2014.
- “Other houses”, consisting of townhouses, houses of character and villas, experienced the highest price increase of 16.17% (15.38% inflation-adjusted) during the year to Q3 2014.
Rising house prices are partially attributable to the Individual Investor Programme, introduced in the government’s budget of November 2013, which targets high net worth individuals. In addition, the stamp duty exemption for first-time buyers on the first €150,000 of their new property’s value has been extended till June 30, 2015 for all contracts for sale made on or before that date.
From 2000 to 2007, the Maltese property market enjoyed strong growth, with the overall house price index rising by 78.9% (53.4% inflation-adjusted). Over the same period:
- Terraced houses saw the largest price increase of 105.3% (76% inflation-adjusted)
- Apartment prices rose by 83.3% (57.1% inflation-adjusted)
- Maisonettes prices increased by 81.4% (55.5% inflation-adjusted)
- Townhouses and villas rose by 71.9% (47.4% inflation-adjusted)
However, property prices started to fall in 2008 due to the global financial meltdown. The house price index dropped by 4.3% (-9% inflation-adjusted) in 2008, 1.4% (-1.1% inflation-adjusted) in 2009 and another 2% (-4.4% inflation-adjusted) in 2010. After a short-lived recovery in 2011, house prices fell again by 2.2% (-5% inflation-adjusted) in 2012.
Confidence is still shaky. Construction firms’ confidence fell slightly from -19 in June to -21 in September 2014, though it remained above the long-term average of -31, according to the CBM. In 2013, the total number of new dwelling permits rose by 4.8% to 1,004 permits, but the actual number of dwelling units permitted fell by 11.7%, because fewer apartment unit permits were applied for.
Malta’s economy is expected to expand 3.5% in 2015, from 3.2% in 2014, according to Finance Minister Scicluna. During the 3rd quarter of 2014, the economy rose by 3.8% in real terms, much faster than the euro area’s y-o-y economic growth of 0.8%.
There are many restrictions on property ownership in Malta. Foreign nationals and EU citizens can only buy one property in Malta, and usually only for owner-occupancy. But 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, 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.
Investment property in Malta – rental yields around 3.8%
Rental yields in Malta are about the same this year as last year, after a period of increase.
Investment apartments in the favourite expatriate areas such as Sliema, St. Julians and Swieqi have average prices per square metre of around €2,000 to €2,900. In these areas, one can expect to earn an average rental return of around 3.8%.
Frankly, these are not great rates of return.
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 taxed at progressive rates, up to 35%.
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 11.68% 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: one of eurozone's better-performing economiesThe Maltese economy accelerated further in 2013, expanding by 2.4% y-o-y, after a meagre 0.6% annual GDP growth due to the eurozone debt crisis in 2012.
The Maltese economy expanded by 3.5% annually from 2005 to 2008. After contracting by 2.6% in 2009 due to the global crisis, the economy bounced back strongly with real GDP growth rate of 2.9% in 2010 and another 1.7% in 2011.
By the end of 2014, the economy is expected to expand by around 3.2%, according to Finance Minister Edward Scicluna's 2015 Budget speech of November 2014. GDP is expected to grow by 3.5% in 2015. Growth is predicted to continue in 2016 and 2017 with 3.4% and 2.9% growth rates, respectively.
The government has been committed to bring down its deficit to below 3% in 2013. For 2 consecutive years this has been achieved, and the deficit is expected to fall further in 2015. The country’s fiscal deficit was reduced in 2013 to around 2.7% of GDP from 3.7% in 2012. By end of 2014, Malta’s deficit to GDP is down to 2.1% and is expected to decline further to 1.6% in 2015, according to Finance Minister Scicluna.
These improvements are backed by Malta's resilient labour market. In 2014, employment grew by around 2.1%, with unemployment of around 6%. Malta’s unemployment was 5.9 % in Q2 2014, much lower than European Union’s 10.3% and Euro Area’s 11.6% unemployment rates.
Inflation was 0.6% in November 2014, up from 0.3% a year earlier.