Oasis of Resiliency Malta Has Confidence in Its Market

SLIEMA, MALTA — As residents of a Mediterranean island known throughout Europe for its resilience in adversity, many Maltese tend to see the current troubles of the euro zone as relatively small potatoes. After all, the island has faced great peril and triumphed, like in the terrible sieges by the medieval Ottoman Turks and the Axis forces in World War II.

So when it comes to high-end residential real estate today, Maltese brokers are often bullish, pointing to a rash of new luxury developments and some enticing government tax incentives as reasons for being cheerful.

“We’re doing fine,” says a local industry expert. “If a property is good — in a good location, of a good standard — it’ll always be sellable.”

Yet behind the confidence are there are some troubling signs for one of the world’s smallest countries, with just 316 square kilometers, or 122 square miles, and a population of just over 400,000?

The most recent figures from the Maltese Central Bank show that the number of new building permits in the third quarter of 2011 fell 24 percent from a year earlier, with average home prices falling 2.6 percent in the first six months of last year. This is very much of a correction, rather than a bubble bursting,” said Stefan Bonello, a partner with PricewaterhouseCoopers in Valletta, Malta’s capital. “There was quite a boom in real estate on the island from the mid-1990s, until the global downturn in 2007 and 2008. In certain cases, prices back then were set on a basis which goes beyond the intrinsic economic value of the property. Since then though, everyone’s been a lot more cautious — and more realistic.”

Yet, while prices may have stumbled, there has been continuing overseas demand for high-end property in what is now a buyers’ market.

“Malta has always been a very attractive place for foreign nationals,” said Joseph Lupi, managing director of Frank Salt Real Estate. “That hasn’t changed. There is the Mediterranean climate and lifestyle, plus English is an official and widely spoken language. Because it’s a small island too, everywhere is very accessible. You’re never more than 15 minutes’ drive from a beach.”

The island has been a member of the European Union since 2004, so citizens of all E.U. countries have an automatic right to settle there and to find work. But wealthy, non-E.U. citizens also can do so through a government program called the High Net Worth Individual Scheme.

The program includes a 15 percent income tax rate for those who buy a property worth at least €400,000, or about $528,000, or pay at least €20,000 a year in rent. Those who earn more than €75,000 a year working in selected professions, like interactive gaming and finance sector, also can claim the low tax rate.

“There are also the ‘Special Designated Areas,”’ said John Sullivan, manager of the Malta office for the KPMG professional services network. “Within these, E.U. and non-E.U. citizens can buy without restrictions, and buy more than one property.”

In other areas, non-E.U. citizens need government permission to buy, while E.U. citizens need a permit to buy more than one residence.

One popular designated area is the Fort Cambridge luxury development in Sliema, an urban district on the island’s northeast coast already popular with expatriates. The project, a cluster of concrete, steel and glass high-rise towers with 341 apartments, is scheduled to be completed in September. It offers units from 60 to 600 square meters, or 646 to 6,458 square feet, for €200,000 to €1.8 million.

Full article by Jon Gorvett titled Oasis of Resiliency, Malta Has Confidence in Its Market
published in the New York Times, February 16th, 2012