Buying a property in Malta

Beautiful Mediterranean climate and high standard of living, the almost zero crime rate and the absence of property taxes make this tiny European country very interesting for buying a home. The advantages of Malta also include relatively good transport accessibility and the opportunity to teach children in local educational institutions. Foreigners may well purchase real estate in Malta. However, for citizens of non-EU countries, it is required to obtain permission from the Ministry of Finance of Malta. For foreigners, there is a minimum threshold for the cost of various objects, at which they can be purchased. You will also need to prove the availability of the required amount in a bank account in a Maltese bank.

Malta is a country of resort real estate. Because of its small size, even if you have purchased a house not at all on the shore, you can get to the sea from everywhere quickly enough.

The largest island of the archipelago, like the country itself, is named Malta. Real estate can be purchased here, for example, in the capital – Valletta. However, although the city is the capital, it is tiny in itself. The only university in the country is located here. Therefore, if you are interested in houses and apartments in Malta while your children are studying here, it is worth paying attention to Valletta. Or, on the contrary, in the capital, you can buy real estate for rent. Tourists will be especially interested in renting apartments — Malta is quite a popular tourist destination and after buying a property you will be able to earn a stable income.

The island of Gozo (Gozo) is also Malta. Real estate here may be interesting for a more relaxing holiday. It is not so lively here and there is much more greenery than on the main island of the archipelago.

In addition to buying real estate in this country is a Schengen visa. Malta thus becomes a real "second home" abroad, because you get the opportunity to enter its territory multiple times.

Malta has a high standard of living and property prices are appropriate. It is unlikely that you will be able to buy a decent object cheap, but, by European standards, it is quite inexpensive here.

Real estate in Malta has long been popular with foreigners. During the pandemic, the market situation has become somewhat complicated, but in the future it is expected to restore the lost positions.

Market trends and forecasts

Malta's real estate market showed strong growth from 2000 to 2007, at the same time, the housing price index increased by 78.9% (53.4% adjusted for inflation). Malta's housing boom peaked in the second quarter of 2004., when house prices increased by 36.73% compared to the same period last year. when house prices increased by 36.73% compared to the same period last year. The boom was caused by low interest rates, which had an extremely strong impact, increasing mortgage debt from 19.6% of GDP in 2002 to 34.6% of GDP in 2006. (now it is 45.8% of GDP).

The supporting factor was the investment registration scheme, tax amnesty for Maltese residents with foreign assets, valid from 2001 to 2005.

Then, like other European countries, Malta suffered from the global financial crisis of 2008. Depending on foreign trade and tourism, Malta's economy shrank by 1.1% in 2009 - the first decline since 2001, and from 2008 to 2010 housing prices fell by 8.8% (-15.2% adjusted for inflation). After a brief recovery in 2011, housing prices fell again by 2.2% (-5.2% adjusted for inflation) in 2012.

Then in 2013, housing prices rose strongly, mainly due to the introduction by the government of new measures related to real estate in particular, the Maltese Individual Investor Program (MIIP). Since then, housing prices have been rising steadily.

Factors influencing the rapid growth of house prices in Malta over the past eight years:

• strong economic growth averaging 6.5% annually from 2013 to 2019;
• introduction of MIIP in 2013 for wealthy individuals;
• low interest rates;
• high income;
• the growth in the number of foreign workers in the country.

The increase in prices was also facilitated by the exemption of new property buyers from paying stamp duty in the amount of 3.5% from the first 150,000 euros of the value of the new property. In 2018, secondary buyers were entitled to a stamp duty refund of up to 3,000 euros when replacing their current residential buildings, but not if they own any other real estate or are being converted into a luxury villa.Homeowners with disabilities can benefit from a higher stamp duty refund of up to 5,000 euros.

Then, in June 2020, a temporary measure for exemption from COVID-19 was introduced, providing for a reduced tax and duty rate of 5% and 1.5%, respectively, for the first 400,000 euros (483,308 US dollars) when transferring real estate. The event lasted until the end of July 2021.

In the 1st quarter of 2021, there was the largest increase in the number of transactions. On the contrary, in Gozo, the number of residential real estate transactions continued to fall, falling by 8.1% YoY in the first quarter of 2021. In the regions of Valletta, Floriana, Marsa, Amrina, Tal Pieta and Santa Venera, there were no changes in sales transactions.

Who can buy property in Malta?

Due to the relatively low cost of living on the island, as well as the sunny climate and hospitable population many foreigners prefer to buy real estate in Malta. To any citizen who is not a Maltese citizen, whether an EU citizen or a citizen of any other country A buyer of a property in Malta that will not be their main place of residence will need an AIP (Real Estate Acquisition Permit).

• If an EU citizen purchases real estate in Malta as his main place of residence, he does not need an AIP permit.
• If an EU citizen has been living in Malta for more than 5 years, he will not need an AIP permit.
• If an EU citizen buys a property in Malta as a second home (and therefore not as a primary residence), he will need an AIP permit, unless he has lived in Malta for more than 5 years.

A fee of €233 is charged for the permit. The permit is usually issued within 35 days.

The application form for this permission can be found here.

The tax system is especially beneficial for foreigners with resident status, since such persons are not subject to capital gains tax from abroad and income from abroad, not transferred to Malta.

The following residence and citizenship programs are currently available:

• Global Residence Program in Malta
• Malta High-Income Persons Program (HNWI)
• Malta's Rules on Highly Qualified Specialists
• Maltese Pension Scheme (MRP)
• Malta Residence and Visa Program (MRVP)
• Citizenship for exceptional services

Malta Housing Prices

The cost of real estate in Malta largely depends on what type of property you are buying and where it is located.

To give you an idea of how much real estate costs in Malta, let's look at the average prices per square meter of apartments, houses, and townhouses in different regions of the island.

The Buying Process

The process of buying a property in Malta can take from several weeks to 3 months. The costs of the entire transaction amount to 7-8% of the value of the property. The whole process can be completed through agents and lawyers without the presence of the investor in Malta at the registration.

Buying a property in Malta requires complete transparency. If earlier various organizations had the opportunity to earn more money or play tricks, now all this is controlled and transparent.

Thus, as a foreign buyer, you will know exactly how much and to whom your money goes. Short and simple.

The closing of the transaction is determined by a specific time when the Seller is ready to transfer the property (with the title), and the Buyer has all the funds necessary for payment.

Previously, closing meant that everyone sitting in the room signed documents at the same time. Today, many closures are called remote (or cabinet) closures because the title company collects all the necessary signatures before the closing date and simply collects the final documents and distributes funds without the need for the presence of a Buyer or Seller. Most likely, this is exactly what will happen with your purchase. It's actually quite convenient.

During the closing, the Buyer pays for the property, title works and insurance, assessments, surveys and other expenses related to the purchase of real estate. Your realtor will tell you in detail what to expect, but in general, keep in mind that there are additional costs in excess of the purchase price that you will pay for closing the transaction. The rule of thumb is to use 1% of the purchase price as the upper limit for typical closing costs.

The sale of real estate in Malta takes place in four stages:

1. Selection of real estate. A realtor helps a foreigner to find a suitable property and contacts the seller or his real estate agent, to inspect the property and discuss the details of the transaction.

2. Notary public. The main work is performed by a notary, who applies for a permit to purchase real estate, assumes the main responsibilities for transaction support, represents the interests of the buyer during the purchase and draws up a contract of sale. A foreign buyer cannot buy real estate without a notary, since only a notary has the right to certify transactions, withhold a deposit and pay the necessary fees and taxes on behalf of the buyer.

3. The buyer's notary contacts the seller or his real estate agent, to inform them of the buyer's intention to purchase the selected property. The notary oversees the legal aspects of the sale and verifies that there are no encumbrances or obstacles to the purchase, draws up a preliminary contract of sale with the seller or his lawyer and agrees to the terms of the contract.

The preliminary agreement must contain the following information:

• Expenses
• Condition and description of the property
• Land tax
• Any repairs or other work that the seller must perform before the sale.
• Furniture and appliances, if they are included in the transaction price
• The term of the contract (usually 3 months, but sometimes from 6 to 12 months), during which the seller must perform all the agreed work.
• The amount of the deposit that will be withheld by the seller if the buyer unreasonably refuses the transaction.

Purpose of purchase. If the buyer purchases real estate for the purpose of obtaining permanent residence or citizenship, this should be reflected in the document. Then, if the application for a residence permit or citizenship is rejected, the buyer can withdraw from the transaction without losing the deposit. After signing the preliminary contract, the buyer pays the first part of the stamp duty, 1% of the property value, and a deposit, usually 10-15% of the sale price. All money transfers in a real estate transaction are carried out through a notary. At this stage, Malta Villas specialists will help the buyer to get a mortgage if he buys a property with borrowed funds.

4. Signing of the purchase and sale agreement. After signing the preliminary contract, the buyer's notary verifies the legal aspects of the property, including the absence of obstacles or encumbrances on the property that may complicate the sale. The notary then submits a notice of the upcoming transaction and transfers 1% of the stamp duty to the Ministry of Finance of Malta (Department of Internal Revenue (IRD)). The Ministry of Finance confirms that the transaction is registered.

If a foreign buyer needs a purchase permit (AIP permit), the notary submits an application for its receipt at this stage.

The notary prepares the final contract of sale. The buyer pays the remaining 4% of the stamp duty, based on the sale price, as well as notary and registration fees. The notary transfers the original signed copy of the contract to the National Archives of Malta, and copies of the document to the buyer and seller.

After that, the owner registers the transfer of ownership of the property in the land register and receives a certificate of ownership. This can be done without the physical presence of the buyer in Malta — by Proxy.

Expenses related to the purchase of real estate in Malta

When buying a property in Malta, it is necessary to take into account some expenses.

• 5% stamp duty
• 1% - 3% notary fee
• 600 euros (approximate fee) for search and registration
• AIP permit fee of 233 euros
• The agency fee (usually 5% of the sale price) is paid by the seller of the property, and the costs associated with the above-mentioned expenses are borne by the buyer.

How much does housing in Malta cost in 2021

The demand for housing in the country in 2021 is comparable to the pre-crisis level and is growing despite the pandemic and closed borders.

1,157 real estate reservation agreements were concluded in Malta in January 2021. This is 27% more than in January 2020. At the same time, prices for different types of housing in the country fell by an average of 0.4% compared to pre-crisis indicators.

The annual turnover of the Maltese real estate market at the end of 2020 amounted to 3 billion euros – the same as in 2019. Another 274 million euros will come from transactions under real estate booking agreements concluded in January 2021.

Price for real estate in Malta in 2021

Real estate prices depend on two parameters: the type of housing and the region.

The cost by type of housing at the end of 2020 was compared with the price increase in the fourth quarter of 2019. Townhouses have fallen in price the most. The cost of maisonettes, apartments and penthouses has not changed much over the years. But terraced houses have gone up a bit. The price per square meter when buying a home also depends on the type of property and the region in which it is located.

Malta is divided into six regions. The capital, Valletta, is located in the Southern Harbor region and the popular resort town of Marsascala is located in the Southeastern region. Other major cities in the North Harbor area include Sliema, Birkirkara and Gzira.

The cheapest real estate is located on the island of Gozo. The most expensive apartments are located in the Northern Harbor area, and the most expensive terraced houses are in the Northern region.

Average price per m² by housing type in Malta

Long-term rent is the lowest in Gozo. The most expensive rental options are located in the North and South Harbor areas.

Long‑term rental price index in dierent cities

Additional costs when buying a property in Malta

The buyer of Maltese real estate also pays the fees and, if necessary, the purchase permit and the architect's report. Here are the expenses that need to be paid:

• 5% of the value of the property – stamp duty;
• 0.25-1% of the real estate value – notary fee;
• 1% of the property value + 18% VAT on the amount of the fee – agency fee;
• € 233 – purchase permit; about € 300 – architect’s report.

The stamp duty rate has been temporarily reduced. This will be only 1.5% of the value of the property, if the transaction amount does not exceed € 400,000. If the value of the property exceeds the threshold, the buyer pays 1.5% of 400,000 euros and 5% of the remaining value. But in order to take advantage of the discount, you must sign a sales agreement by March 31, 2022.

Citizenship or a residence permit in exchange for real estate

Real estate in Malta is a liquid asset. The average annual increase in the value of real estate before the crisis was 5-10%, in resort areas — up to 15-20%.

The average rental yield is from 5 to 10% per annum.

• Malta's economy will begin to recover from the effects of the pandemic in 2021. This is the forecast of the European Commission and international credit agencies. And when the country opens the border to tourists, the prices for buying and renting real estate will rise rapidly.

Real estate experts Malta Villas recommend not to postpone the purchase of real estate in Malta until 2022. It is more profitable for investors to purchase objects now, while prices remain low and there is a discount on the payment of stamp duty.

Foreign buyers of real estate in Malta can also become residents and citizens of the country.

A permanent residence permit in Malta is granted if several conditions are met. In 2021, the applicant:

• buys or rents housing on the island;
• pays the administrative fee and the state fee;
• makes a donation to a Maltese non-governmental organization;
• confirms the presence of assets from 500,000 euros.

Мальтийское гражданство может быть получено только путем натурализации путем прямых инвестиций.

Maltese citizenship can only be obtained by naturalization through direct investment.

The candidate first receives a residence permit, and after a year or three years has the right to apply for citizenship. If the application is approved, the candidate invests from 690,000 euros in the country's economy and becomes a citizen of Malta. Direct investment also includes buying or renting real estate on the island. The minimum transaction is 700,000 euros when buying a property and 16,000 euros per year when renting.

Maltese residents enter the Schengen countries visa-free and have the right to live, work and study in the country without restrictions. And a Maltese passport gives access to all the rights of a citizen of an EU member state.