A Healthy Investment
The local buy-to-let market is experiencing strong growth, says Douglas Salt, a director of Frank Salt Real Estate Limited.
How has the local buy-to-let market grown in these past years?
In recent years, the buy-to-let market has enjoyed strong growth thanks to thousands of foreigners visiting our islands. This is because foreigners who are working here or are looking to settle in Malta want a place where to stay while they look for a home to buy. However, the market is not just for foreigners because rentals by Maltese are also on the increase.
As a consequence of this, demand for rentals has gone up. This activity has pushed investors to invest in buy-to-let properties, aiming to earn an average five percent rental return.
Have any government initiatives also supported this growth?
There are government policies that are encouraging growth in the financial services, health services and i-gaming sectors. People working in these sectors are the main candidates for rental properties.
What potential risks does the buy-to-let market present?
There are only a few risks. In fact, most buy-to-let property is rented back-to-back. Unless there is a mass exodus from Malta, it is unlikely that the buy to-let market becomes risky.
And what are the benefits?
The demands for the rental market are different. For instance, there is a high demand for one-bedroom properties. Areas outside Sliema and St Julian’s such as San Gwann and central inner areas are also becoming quite popular. This interest is translated into increased rental activity.
Should one invest in a niche market and with a particular customer in mind?
There are three markets in buy-to-let: the low-end, middleend and high-end markets. People investing in the middleend market would expect better returns. Also, the properties that attract the most customers are those which are attractive, have well kept common areas, are in a good location and have a terrace or outside area.
Apart from the cost of the property purchase, what other investments are needed to operate in the buy-to-let market?
You need to furnish the property with modern fittings, fixtures and decor rather than throwaway furniture. Also, the furniture especially needs to be of a good quality that can stand wear and tear. Moreover, the property must have good light and be attractive.
Which areas in Malta offer the best buy-to-let properties?
Sliema and St Julian’s attract a lot of interest. Other locations are also desirable, including Marsascala, Mellieħa, St Paul’s Bay and Gozo. Other area such as the three cities and Valletta are up and coming, while San Gwann, Attard and Naxxar are also experiencing growth. Any location which offers an abundance of amenities is likely to be popular.
What are the average returns on a buy-to-let property?
The returns vary from four to six per cent: it’s safe to say that the average return is five per cent. There is also the law of decreasing returns. The more you spend on a buy-to-let property, the less returns you can expect as there’s always a limit to how much people are prepared to spend to rent a property.
When taking out a loan to invest in a buy-to-let property, how do the conditions differ from when buying a residential property?
The only differences are that the interest for a loan for a buy-tolet property is five per cent as opposed to 3.75 per cent for a home loan. Moreover, stamp duty is five per cent.
Our rental property experts provide no obligation consultancy on the matter, also helping clients source the ideal buy-to-let property that fits their finances. Our Home Interiors Division can also assist in furnishing your property, providing you with a reasonably priced furnishing solution, while our Property Management team can assist with the long-term management of the property, thus providing a hassle-free and time saving solution.