Comprehensive Guide To Property Investment In Malta

Property Investment Malta

When it comes to investing in property, more foreign nationals than ever are interested in Malta as their location of choice. If you are one of them and you are not sure where to start, this guide will take you through the process of property investment in Malta.

Malta in a Nutshell

Over the past few years, Malta received a lot of attention for its real estate market’s steady growth. This has positioned the country as an ideal location for foreign investors looking to buy property either as a holiday home or an investment. Before dipping into your pockets and looking into buying property in Malta, here are some quick facts about this country: 

  • The Maltese islands are an archipelago situated half-way between Africa and Europe and is the perfect mid-way point between the two. The island group consists of Malta, Gozo, Comino, Filfla, St. Paul’s Islands, Manoel Island and several other smaller ones. Malta is 93km from Sicily and 300km from the North African Coast.
  • Malta is an independent sovereign country, having gained independence from the British in 1964 and the smallest in the EU, only covering 316 km². It is part of the Schengen territory, which promotes free trade and travel for its residents between member countries. 
  • Malta is also affiliated through trade agreements, as part of its EU membership, with countries such as Iceland, Liechtenstein, and Norway. 
  • Malta is the eight most densely populated country in the world and its capital is the World Heritage City of Valletta. Annual tourist arrivals top more than 2,100,000, making it one of the top destinations for Europeans looking to soak up the sun year-round.
  • The official languages in Malta are Maltese and English. A lot of influences on the Maltese language have been inherited from Arabic, Latin, Italian, French and English.
  • Foreign nationals living in Malta enjoy the fantastic Mediterranean weather with an average of about 300 days of sunshine a year. Temperatures range from 12-20 degrees Celsius in the winter to scorching daytime temperatures of 34 to 42 degrees Celsius in the summer.
  • Malta’s currency is the Euro (€) and it is a full member state of the EU. 

Reasons Why Property Investment in Malta is So Popular

Why Invest in Malta

Malta has no natural resources such as mining and thus had to find other avenues to make it attractive as an investment destination, one of them being real estate. Property investment in Malta has been extremely buoyant since 2007 and forms an integral and important part of the country’s economy. 

With countless new construction projects on both Malta and Gozo and property sales at an all-time high, there seems to be no slowing down. Record numbers of Promise of Sale Agreements are being signed month after month according to the latest official figures from the MDA. The result is that Malta’s property market has continually outperformed many others in the EU and this has made the country a very attractive destination, not only because of the capital appreciation of its real estate, but also because investing in real estate is regarded as liquid and therefore qualify for consideration when acquiring Malta citizenship by investment, given that certain criteria are met. 

Here are more reasons why property investment in Malta is so popular: 

The lucrative rentals market

Malta’s rentals market is prolific and extremely profitable, both long and short-term. This is due to several factors such as its popularity as a tourist destination, the number of contract workers requiring accommodation and the influx of foreign students that attend Malta’s language schools. Lastly rental properties also provide housing for citizens and residents who do not own their own homes. 

With interest rates at historically low figures, many investors opt to buy a second or even a third property to rent out. The reason for this is that the income generated through rentals far exceeds the interest charged on any of the home loans buyers may have entered into when buying their second or third property. 

The capital appreciation for property

It has truly been a buyer’s market in Malta for many years, if not decades. Locals place strong emphasis on home ownership as an investment and as a savings measure – simply by not having to pay rent to someone else. Ownership of property is also encouraged from generation to generation and this has contributed to demand. Malta Citizenship by Investment and residency programmes have also contributed in driving the prices of real estate up.

When we look at the past 20 years, we see a strong growth from 2000 to 2007 with the overall price index of properties for sale in Malta escalating by nearly 79% (78.9% and 53.4% when adjusted for inflation). In 2004, an unbelievable economic boom led to an astounding increase in house prices by +36.73% year-on-year. Current factors contributing to the success of the real estate market include the country’s fast growing economy, the low-interest financial environment, more disposable income by individuals and also an increase in well-paid foreign workers employed in iGaming, banking and the IT sector.

One of Malta’s main foreign investment attractions, besides the capital appreciation of its property of 5% year-on-year, is its Malta Citizenship by Investment program. This allows for the purchasing of property to be taken into account as a qualifying criteria, given the proper amounts required for purchasing a property under these schemes are met. The amount for a qualifying property rental is €16,000 p.a. or when purchasing, it is €700,000. In both instances this must be upheld (the duration of rent or ownership) for a minimum period of 5 years.

Favourable tax structures for property ownership and personal income are some of the main factors contributing to the popularity of property investment in Malta to foreign nationals.

House prices are still increasing despite the pandemic and the latest figures released by the MDA shows that for February 2021 an increase of 40% in Promises of Sales were recorded when compared to the same time last year. This calculates to an increase of more than €100,000,000 in value for February 2021.

With more properties for sale in the market one would have expected a decrease in apartment prices, but what this has done instead is to stabilise this sector of the market. Additionally, incentives from the Maltese government for First-Time Buyers were also introduced: not only as a stimulus during the advent of Covid-19, but also to aid those who are buying their very first property.

The chance to have a holiday home in Malta

Many visitors to the islands fall in love with the lifestyle and decide to buy a property in Malta. It is important to take one’s long-term vision into consideration, whether it will remain just that: a holiday home, or whether it will eventually become a permanent home. Other factors come into play such as the possibility of renting the property out while you are not there.

Most buyers simply retain the privacy and exclusive use of the properties they have bought, simply because they are not in the business of renting them out and do not plan to do so in the future. For these buyers it does not matter where the property is located; it is all about the choice of lifestyle the property offers when you are making use of it on holiday. Purchasing a property as a holiday home for exclusive personal use is a straight-forward process.

Should you be looking at renting out the property successfully, you will have to factor in the following:

  •         the type of property,
  •         its location and
  •         other criteria as determined by the Malta Tourism Authority
  •         You will also need a license to rent the property out
  •         As a non-resident, should you buy outside one of the Designated Areas, you will need to also apply for an AIP (Acquisition of Immovable Property) permit before you can buy
  •         You will also have to declare the income derived from property in Malta for rent, whether you are resident or not

The  best advice is to speak to your estate agent and ask them to explain all of the rules and regulations in detail, as these are updated on a regular basis.

Property Rental Investments in Malta vs Other Countries

Long-term rentals of investment properties

A few countries in Europe that tops the list for rental investment are Malta, Portugal, Spain, and Italy. Although property prices may be favourable in some of these countries when it comes to rural areas, the true reflection for rental properties bought as a business concern i.e. renting them out is only comparable when they are located in more cosmopolitan areas. 

This is due to their proximity to airports, beaches and commercial centres providing access to shopping and entertainment as required by most tourists. The table below looks at the comparison of popular cities in their various countries and prices are based on monthly average rental asked.

2020 CURRENT MARKET RENTS ESTIMATES

Average rent per month given in the local currency of each country

COUNTRY / CITYFLATSFLATSFLATS HOUSESHOUSES
3-BEDROOM2-BEDROOM1-BEDROOMNON-DETACHEDDETACHED
FRANCE / PARIS€ 2,900€ 2,200€ 1,250€ 2,700€ 3,600
GERMANY / MUNICH€ 2,250€ 1,700€ 1,350€ 2,600€ 3,900
ITALY / ROME€ 1,650€ 1,250€ 950€ 1,450€ 2,000
MALTA / VALETTA€ 1,450€ 1,100€ 850€ 1,850€ 2,950
PORTUGAL / LISBON€ 1,950€ 1,500€ 1,050€ 2,550€ 3,350
SPAIN / MADRID€ 1,850€ 1,350€ 1,000€ 2,150€ 3,100
UK / LONDON€ 2,750€ 2,100€ 1,600€ 3,150€ 4,350
CYPRUS / NICOSIA€ 920€ 720€ 600€ 1,150€ 1,750

Short-term rentals yields of investment properties based on Airbnb

May 2019 saw nearly 9000 short-term listings on Airbnb alone for Malta and the majority of these are centred around the usual tourist areas and boasts around a 70% occupancy rate. The average price per night is around the €80 mark and this is incrementally increased by extra bedrooms, having a pool, views and the ability to accommodate additional guests. The majority of these rented out properties are entire dwellings such as apartments, houses of character and villas. 

More than 2,100,000 tourists visited the islands during the first nine months of 2019 and Malta’s increasing popularity has turned the short-term let industry into a huge business. As a result of this, the demand for rental properties increased dramatically, especially in the buy-to-let category. Below are the averages rental attained by Airbnb per night, per country in £ and €.

2020 CURRENT MARKET RENTS ESTIMATES

Average rent per night given in the local currency of each country

COUNTRYPOUND £EURO €
UK£75€ 86.26
CYPRUS£75€ 86.26
NETHERLANDS£69€ 79.36
FRANCE£62€ 71.31
MALTA£54€ 62.11
ITALY£53€ 60.96
SPAIN£53€ 60.96
GREECE£48€ 55.20
GERMANY£45€ 51.75
PORTUGAL£45€ 51.75

There is no doubt that global travel will only keep on increasing and the demand for property to accommodate all these travellers and tourists will keep up in tandem. With interest rates at a relative low in Malta, it makes more sense to invest spare cash in a property and let it out. Whether a property is let long- or short-term, the income generated from letting out a property currently covers not only the interest charged on the bond amount, it in many cases it can make the owner money. This is especially true if they buy wisely in tourist hotspots whie advertising and managing their properties proactively. Additionally there is capital appreciation over time, so this is a win-win situation for buyers and owners of buy-to-rent properties.

Things to Consider Before Buying a Property in Malta

How are you going to finance the purchase of the property?

Bank Loans

    • Banks prefer to loan to clients that are reliable and if you are non-EU, this will be more difficult so if you can, buy your first property outright.
    • You will usually get up a loan of up to 80% of the price/completion price while locals get 90%.
    • Your monthly repayments and therefore how much you will qualify for, will be capped at 30% of your gross income
    • Repayment terms can be calculated up to a period of 40 years, but the norm is 25 years. The shorter (if you can afford it) the better.
    • Your age will play a role in the qualification process.

Good to know

  • You will be able to choose between a fixed or flexible interest rate, but keep in mind that if you choose the fixed option, you at least will always know what repayment you are in for. 
  • The downside is that this fixed rate will never go down even if the central bank decides to lower national rates. 
  • On the other hand, should you have opted for a flexible rate you will benefit from a lowering in the interest rate, but also have to pay more should the interest rate escalate. 
  • Many wise buyers have opted for a fixed interest rate in order to facilitate proper personal financial planning and forecasts for the year. 
  • Always make sure you can afford the repayment and budget properly for it. You need to have at least six months’ worth of instalments saved in case you need it for unforeseen events related to the property and always make sure that you have a guaranteed chance of renting the property out for more than what the bond repayment amount will total to each month.
  • Remember that if you are planning on doing short-term lets (shorter than 6 months at a time) or run the property as a business, you will also have to pay tax on the income generated.
  • Another plus point is that the longer you keep the property, the better the chances are of capital appreciation on your investment, so over a couple of years it will be worth more than what you bought it for, given you have bought wisely. 
  • Lastly, we encourage those who finance a property with a loan to put in additional cash whenever they can, as this will not only shorten the repayment period but also bring the outstanding amount the interest is calculated on, down.

Where is the property located?

Close to beaches, entertainment areas, and tourist attractions

Beach in Malta

One of the benefits of a property located here is that your tenants will never be bored, as they are in the middle of the action. It will also have access to good public transport and be close to restaurants, beaches and other popular attractions. Should you have a perfect holiday rental property and manage it well, people will return again and again given they have enjoyed their stay. Word-of-mouth will see that you are never short of bookings.

The downside is that your guests will face jostling with crowds, possible noise 24 hours a day and also will have to pay premium prices for everything from a bite to eat to a bottle of water.

If you decide to buy a property here, it will cost a lot more and even small apartments can have an eye-watering price tag. Additionally, as the owner, you will have to be on top of your game as one bad review in today’s social media world can cost you a lot in cancellations.

If you are new to the game of short-term rentals, instead of going into debt by insisting on having an expensive property in the most popular tourist area, start out slowly by investing elsewhere and then upgrade as you become adept at managing your concern successfully.

Popular areas for tourist-based property rentals are Bugibba, Marsascala, St. Paul’s Bay, Mellieha and certainly anywhere in the greater Sliema area, St. Julian’s and certainly the World-Heritage Site that is the Maltese capital, Valletta.

Close to business centres and office hubs

commercial offices frank salt

Owning a rental property or renting out a room in Malta near a business centre or office hub takes proper planning before you buy. On the upside it will most likely be cheaper than buying a property in a tourist hotspot and depending on the location, you may be lucky enough to sign up a dream long-term tenant unless you are in the market for short-term rentals only. Many foreign workers come to Malta on year-based or longer contracts.

With Malta’s healthy economy, buying an apartment near one of these business hubs can be a sound investment and appreciate handsomely over time, as well as make some good rental income. As these properties are geared towards professionals and not tourists, you will have to plan for a sleeping space, proper kitchen and toilet facilities, ventilation and air-conditioning, exactly like a lux hotel apartment. You will also have to see that it has excellent internet connectivity as many people in the IT industry work after hours or from home and secure access and parking is a must if you want to charge premium prices. Also make sure the location has easy access to major arteries and that it is not too far from the airport.

Invest wisely and plan properly when buying: make sure the location is prime, the size is comfortable and that it will appeal to business professionals. If you do this, you will be on the right track.

The downside of owning a property like this is that during times of economic trouble, such as currently with Covid-19, the numbers of foreign or contract workers moving to Malta have dwindled substantially, so you will be at the mercy of economic up- and downswings. 

As these properties are usually smaller and located in or around areas like Mriehel, near the airport or Smart City, they are less attractive to long-term suburban tenants for obvious reasons. Ideally find a property in a perfect mid-way location that fulfil both criteria (suburban and business). This way you will minimise your chances of potential loss during turbulent financial cycles. Areas to consider in this case, should you have more financial means, are Sliema, St. Julian’s, The Strand, Gzira and Ta’Xbiex.

Ideal areas for property investment in Malta and their characteristics

📍 SLIEMA AND ST JULIAN'S

Probably the priciest of Malta’s suburbs but with enormous appeal to locals and foreigners alike. If you have deep pockets, this is definitely the area for property investment in Malta, as prices keep on going up and everyone wants to live here or make it the centre of their holiday stay. A very desirable region which offers a choice of townhouses, apartments, penthouses, palazzos, maisonettes and more to buyers….the choice is endless.

Characteristics of the area:

Central.  Cosmopolitan. Near beaches. On major public transport routes. Large selection of restaurants, boutiques, shops, cafes, eateries and department stores. Bars, restaurants and nightlife.

📍 SWIEQI, SAN GWANN, GZIRA

Adjacent to Sliema and St. Julian’s, prices here are more affordable and the property types are just as varied. Gzira also offers a myriad of bars and restaurants and is on major transport routes. It is a very popular area with students. Valletta is a short drive away. San Gwann is adjacent to Sliema and popular with families and urbanites, but also very close to all the action. Swieqi is to the north of St Julian’s and a short walk away from all the action and beach. Swieqi is widely regarded as upper class and popular property types found here are villas, terraced houses, apartments and maisonettes.

Characteristics of the area:

Central and close to beaches, yet more suburban. The areas are family-friendly and Gzira especially offers opportunities for those who want to rent a property to students.

📍 SANTA VENERA, QORMI, AND HAMRUN

All of these areas are inland in the centre of Malta and away from the tourist trails. Very affordable when it comes to property prices and property types come in all shapes and sizes. Santa Venera is especially popular as it is close to Mriehel with its business hub, so the area has seen a fair increase in the demand for properties to let out to professionals working nearby.

Characteristics of the area:

Very affordable and a wide selection of property types. Home to locals and geared for families, although there are small affordable hotels and BnB’s to be found in the area.

📍 MARSASCALA AND MARSAXLOKK

Both villages are located in the southern part of Malta and are known for their bars, waterside restaurants, promenades and are very popular with both locals and tourists. Marsaxlokk especially has a famous market frequented by thousands of people and is well-known for its seafood restaurants and colourful, traditional fishing boats in the harbour and a favourite with foreign tourists. The towns offer value for money when it comes to property and rentals are big business.

Characteristics of the area:

Very affordable, everything a tourist or holidaymaker could want is within walking distance. Picturesque, within easy reach of the airport. A wide range of property types are on offer with good returns.

📍 MELLIEHA, ST PAUL'S BAY, QAWRA, AND BUGGIBA

Mellieha has Malta’s most famous sandy beach and is packed in the summer with thousands of sunseekers. St. Paul’s Bay is popular with UK expats and tourists, like Qawra and Bugibba with its casinos, clubs, bars and restaurants. This is the goto place for funseekers on the north coast.

Characteristics of the area:

Very affordable, lots of expats and a wide variety of property types. Price ranges are from low to expensive depending on where and what you buy. The advantage is that all the villages have easy access to the major highway that connects the whole of Malta, north to south and all all on major public transport routes. Mellieha is also a stone’s throw from Cirkewwa and the ferries to Gozo.

📍 THE THREE CITIES

If it’s history you are after, the 3 cities of Birgu, Senglea and Cospicua  are the places to stay and it has become immensely popular in the last few years among tourists. Scenic, at the water’s edge of the Grand Harbour, here you will find cafes, bars and restaurants, churches and forts, superyachts and museums. It is the perfect place to invest in buying a short-term rental not only of its own variety on offer, but also because it is a short distance away from Valletta on the opposite side of the Grand Harbour.

Characteristics of the area:

Although bargains could be found a few years ago, these areas have gone up in price. Major upgrades of the entire 3 cities have seen an upswing in its popularity, property prices and desirability as an address. Many foreign buyers have bought here.

Are you looking into long term or short term rentals?

Short-term

With short-term lets the pros are that it is easy to start and the returns could be fantastic. You will also have the place to holiday in yourself, whenever you want. You are usually also paid up front, but there are many rules and regulations to deal with when it comes to short-term letting. The income is not always stable and then there’s the maintenance. You will be in charge of the bills and there is very little to protect you from serious damage caused by guests.

Long-term

Long-term rentals on the other hand gives you, although lower, a secure and regular income. Your tenants are also more likely to maintain and look after things as you have their deposit as security. This is the choice of the conservative investor.

So which should you buy? 

It’s very simple, although one can never predict what will happen in reality: we suggest that if you are going to do short-term rentals, buy a smaller property in a better touristy area. Obviously it will cost more, but the chances of selling it on and making a profit is far greater for both the duration that you own it and upon the eventual resale happening. Long-term rentals are geared towards locals, families or people that are employed in Malta for work. Potential properties to buy for long lets can be big or small and due to location may be less expensive.      

Should you buy one property or more?

Of course this all depends on the scale of economics of how much you want to spend, but let’s look at the value of €500,000. With this you can choose to buy 1, 2 or even 3 properties. It will buy one good-sized apartment in Sliema with 2-3 bedrooms, near all the touristy spots and for long term rentals you will be looking at approximately €1,200p.m. to €1,450,000p.m. for long-term rentals. If you resell, you will make a handsome profit in no time at all and it will also be likely to sell in a short space of time.

The same amount will buy you 2 apartments in Mosta or Naxxar, each one will bring in €900p.m. to €1,000p.m. for a long-term rental. Although the income will be more for the same amount spent, finding a tenant may be tougher than in popular and sought-after Sliema. In Mosta or Naxxar you are also going to have a difficult time establishing short-term rentals and in selling the apartments.

The best is to speak to your local area agent and get their opinion at all times.

Is it better to buy a new or an existing property?

EXISTING PROPERTIES

It is advisable that you have any second-hand property that you are interested in, evaluated and checked thoroughly by an architect and a structural engineer. Buying cheap property for sale in Malta can end up being very expensive and as they say, “you get what you paid for”. This is not to say that there are not many bargains out there, but just do your homework thoroughly and avoid buying on impulse. Many thousands of buyers have been happy owners of resales or second-hand properties.

NEW PROPERTIES

On the other hand, buying a newly-built property will have you enjoying guarantees and rights as per the law and should anything go wrong, you have legal avenues to pursue in order to cancel the sale and get refunded. 

Buying new also means you will not have any capital outlay to get the property up to standard for human habitation, as is often the case with resales. In order to maximise returns on your property investment in Malta, old or new, Frank Salt Real Estate has a dedicated Home Interiors Division manned by qualified specialists who can assist in getting your newly acquired property into tip-top shape and looking its best when you start looking for those all-important tenants, long- or short-term.

How is the property market doing overall?

Malta’s property market has been bullish and buoyant for many years now and it is unlikely the situation will ever change. Buyers, sellers and landlords have realised unbeatable financial returns year after year and this is likely to continue, fuelling the current construction boom.

Another plus point in Malta is that should you have owned a property for more than three years, the capital gains tax is more favourable. Combine that with the proven capital appreciation and many an investor stands a very good chance of seeing exceptional returns on their investments. This is not the case in many other European countries and the Maltese exception has catapulted the country to the top of the ladder when it comes to the capital appreciation of real estate.      

How is Malta’s economy doing?

Being a full EU Member State, Malta’s government is democratically elected every 5 years and the country is considered to be an advanced economy by the International Monetary Fund, PLUS a high-income country by the World Bank. It is innovation-driven and Malta proudly promotes itself as the first “Blockchain”Island. Besides tourism, I-Gaming is one of the most important industries and the economy overall is described as highly industrialised and service-based.

Due to Covid-19, Malta’s Central Bank predicted that post a contraction of 8.2% for 2020 due to the pandemic the country’s GDP will recover and grow by 5.0% for 2021, 5.5% for 2022 and an estimated 4.7% for 2023. Malta also has a very high employment rate of 74% with unemployment standing at only 3.4% for figures extracted for 2019 (as per TradingEconomics.com 2019 and the IMF).

In Malta, 3-4% out of 200,000 local households are paying monthly commercially related rents. In 2018 out of 2.6 million tourists arriving in Malta, 300,000 stayed in accommodation that was not rented meaning they were staying with friends or owned a property. As we can see, the bulk of rentals are geared towards catering for the lucrative tourism market and short-term rentals. 

According to the latest figures, the most dramatic increase occurred in the last five years when tourism figures increased dramatically (excluding the recent influence of Covid-19). This caused the building industry to go into overdrive, trying to supply enough new properties for a seemingly insatiable buyer’s market and this is unlikely to end soon. 

The Maltese have a strong cultural heritage of rather owning a property than renting one. It is estimated that only 20% of Maltese rent, with a good 10% of those under protection of the rentals act of 1995 (which is under revision).

The Process of Buying Property in Malta

The choices are vast when it comes to houses for sale in Malta. While the buying process in Malta is very straightforward, you still have a lot of things to consider such as qualifying a budget, choosing the type of property you want, and selecting the location that suits you when buying property in Malta

After having viewed properties with a qualified estate agent and finding the one you want, your agent will arrange for all of the documentation to be completed and facilitate the processes needed to transfer and register the property in your name as the new owner.

Below you will find a simplified overview of the process, step-by-step:

  1.   Draw up a Promise Of Sale (Konvenju) using a notary. This is the legal and binding contract with conditions as set out and agreed upon between you and the seller.
  2.   A date will be set to proceed to the next step of signing the final contract.
  3.   During this process experts will investigate and fact-check everything regarding the property.
  4.   The notary will verify who owns the property, the area of land and its boundaries and whether there are any legal issues related to the property/or land. Additionally the notary will investigate what type of ground rent is applicable if at all, determine what fixtures and what fittings are included in the sale.
  5.   The notary and their associates will execute searches on the property, check for any guarantees on the property, verify planning permission, building regulation certificates and also verify that the seller is the undisputed owner of the property.
  6.   Once this is done, the notary will prepare to transfer the title deed of the property into your name.
  7.   You will also have to settle any fees owed to the notary, pay the stamp duty and pay the deposit of 10% of the purchase price if you have not already done so.
  8. At this stage you will be asked to sign the final contract.
  9. Once everything has been approved and signed, the contract will be registered with the Public Registry and you can take possession of the property.

Good to know

It is very important that you confirm with the estate agent and notary (in writing) that all diligence procedures have been followed. Also consider having your independently appointed Maltese lawyer scrutinise the contract before you submit your final signature. 

It is reassuring to know that under newly introduced property laws in Malta, all estate agents need to have a license to sell property. In order to obtain a license, they need to have done an accredited course that covers legislation, tax, and more.

Frank Salt Real Estate was the first company in Malta to get a large portion of their agents qualified and accredited. Besides the compulsory qualification as required by law, all agents that join Frank Salt Real Estate also undergo rigorous in-house training. As a client you can rest assured that when you deal with one of our agents, you deal with a true professional and a company that regards honesty, integrity and ethics as paramount. Should you be interested in buying property in Malta as a holiday home, a second home or to rent out, do not hesitate to call us.