The Mediterranean island of Malta is wooing a younger, wealthier expat base with its new Permanent Residents Scheme, says Laura Henderson.
The EU’s smallest country by both population and size, the bijou nation of Malta is proving a powerful antidote to the recessionary malaise seeping across the Mediterranean at present. Unlike fiscal miscreants Greece, Spain and Italy, the country has at least maintained some degree of composure following a short and shallow recession, with a respectable GDP growth of 2.7 per cent in 2011, driven primarily by growth rates for manufacturing exports, but also tourism.
Malta’s construction industry, in parallel with the rest of Europe has felt the bite of the recession, but real estate growth in the past 18 months has been reflective of a prudent philosophy filtering across all areas of economic activity: a flight to quality, with high value-added real estate development leading the way.
“Premium resort projects such as Tigne Point and Portomaso a mix of luxury homes, commercial outlets and leisure amenities are encouraging construction firms to form and emulate this type of ‘multi-tasking’ development blueprint,” said Douglas Salt, director of national agents Frank Salt. “Infrastructure and restoration initiatives such as the avant-garde remodelling of the Valletta Waterfront are also drawing fresh interest from overseas buyers, while Maltese banks have continued to offer home loans to foreigners, all of which is helping to sustain investor confidence.”
Property prices also remain competitive compared to rival relocation destinations, such as Cyprus and Portugal. The dip in values in 2008 and 2009 is providing a choice of high-quality homes at attractive prices in both finished form as well as developments currently under construction in sought-after districts such as Fort Cambridge in Sliema and Pendergartens in St Julians with entry-level prices from £120,000.
“Activity levels in the construction sector remain high despite the current slowdown in price growth,” said John Cutugno of Homes in Malta. “But the island is also looking at ways to capitalise on its already sizeable expat base – 4.5% of residential real estate is foreign-owned, a large percentage of which is British.”
Close ties with former colonial power Britain, and the advantages offered by the Maltese Permanent Residents Scheme have meant a steady stream of expats setting up home on the island over the past two decades, with numbers now topping 15,000. “Foreign residents have no tax levied on their worldwide income or wealth and are subject to a flat income tax rate of 15% on remitted income,” explains tax consultant Dr Pierre Mifud of EMD Advocates. “Stamp duty is also low, and pension funds are easily transferable, which makes relocation an attractive proposition, especially when you consider that there is no inheritance tax or capital gains tax on a primary residence.”
Launched in September 2011 to replace the ‘less rigorous’ MPR scheme, the High Net Worth Individuals Residents Scheme is seeing a fillip in enquiries from a broader based global investor pool. Applicants must live in Malta for at least 90 days a year and buy property worth at least €400,000 (£335,000) (or spend €20,000 (£15,000) a year in rent). If these conditions are met then foreign income will be taxed at 15%. The minimum tax payable is €20,000 (£15,000) a year and €2,500 (£2,000) per dependent.
“The scheme is one of the elements that is keeping the country’s economy ticking over,” said Dr Mifud. “With its ‘up-market’ revisions however, we’re also now seeing greater numbers of investors looking to do business under the sun.”
Where to Buy
Character homes in secluded community-minded village settings such as Naxxar, Rabat and Lija continue to attract retirees and expat buyers with young families. Restored townhouses and period maisonettes sell from £200,000, vintage palazzos complete with garden courtyards, mosaic pools and roof top terraces from £375,000. “Older properties have a scarcity value,” said Mr Salt. “Period homes are not only irreplaceable, they are also actually designed for the climate.”
Something New Malta’s Environment and Planning Authority (MEPA) has done a rigorous job in nurturing its Special Designated Areas (SDA) regeneration initiative since its launch in 2003 with high-end turn-key residential waterfront and marina developments key components. New projects coming on stream in the past two years, including the traditionally-styled Madliena Village in historic Gharghur and the contemporary Ta Monita in Marsascala, have seen over 30% foreign-buy-in. Prices start in the region of £130,000 for a one-bed apartment, to upwards of £1m for a luxury penthouse, with full property management services on hand.
Buying in Malta
Buyers will find a streamlined purchase process. The island boasts one of the safest and most undemanding legal systems in Europe with contracts written in English and property transfers deemed unbreakable and security of title guaranteed.
Once a property has been selected and price and conditions have been agreed, a preliminary contract is signed between the vendor and purchaser with a sum equivalent to 10% of the price lodged with the notary as a deposit.
Overseas investors are only permitted to purchase one property, the single exception being in SDA resorts where multiple sales are common. The exception to the rule is if you reside in Malta on a permanent basis for five years, then you can purchase additional stand alone property.
Malta charges no capital gains tax on property sales after three years of ownership, but any local or overseas income brought into Malta is taxable at a rate of up to 35%. Residents can however, take advantage of The High Net Worth Individuals Scheme, which charges a flat tax rate of 15 per cent, subject to a minimum tax liability of €20,000 (£15,000).
There is no inheritance tax in Malta, but in the event of death, the beneficiary is liable to 5% transfer tax on the value of the property. If the property is jointly owned and one of the spouses passes away, the 5% is levied on half the value of the property.
Article by Laura Henderson