I spend a considerable portion of my work week talking to wealthy individuals considering Malta as a place to do business and/or to personally relocate. The latter is usually due to the very popular Malta Individual Investor Programme (MIIP), which offers a legally sound path to EU citizenship over the course of 1-2 years, or to one of Malta’s attractive residency programmes available to both EU and non-EU nationals. Many of these individuals are looking at property investments on the island, particularly the MIIP applicants who are required as part of the programme to either rent or purchase local property, as well as remain resident on the island for at least 12 months. As a result, I’m often asked about the potential of Malta’s property market as a long term investment.
Now while I must preface this with all the usual disclaimers about making up your own mind as an investor, I would argue that Malta’s property market is just one more great reason to consider the jurisdiction. In brief, here are the key issues from my perspective:
- For those looking for a low-involvement investment, Maltese property has been appreciating at well above the EU average for the last few years.
- Rents are likewise strong as the island is experiencing a sustained influx of skilled workers that looks set to continue for the foreseeable future.
- Indirectly one can also benefit from real estate through deferred tax. Tax is only paid on the final sale of the property, therefore giving an investor time value over the capital.
- One can also generate a substantial return through leverage. Low interest rates should make it cost effective for investors to acquire a portfolio valued well above their current wealth.
- Malta offers a highly tax competitive jurisdiction for owning property, improving long term profits versus similar opportunities in more onerous jurisdictions.
Now let’s back up those judgements with a few facts. Although property may be considered one of the soundest investments, all investors today are aware that nothing is without risk. When buying property for the purpose of investing, the most important factor to consider is the location. Unlike many other investments, real estate is dramatically affected by the condition of the immediate area surrounding the property and other local factors.
The International real estate market is an ever changing landscape which over the last few years has seen a decline in property prices in many major economies. Malta’s real estate market, however, has not suffered the same volatility that has marked other European markets. The Maltese trust in brick and mortar is a key component to the stability to the property market, which has also been reaffirmed by recent survey reports conducted by the body that issues quarterly statistics for the EU.
Malta may be a tiny island but demand for property in Malta is constantly increasing. Located just off the coast of Sicily, the country’s Mediterranean climate has attracted many tourists and home hunters. Malta has also managed to escape the recent financial crisis much better than most European countries, allowing Malta’s economy to remain relatively stable. The strong local economy, thriving tourism industry, and constant interest from international developers and investors alike mean that property values in Malta have been on the up for some time.
From 2000 to 2007, the Maltese property market enjoyed strong growth. However, property prices stabilised and even started to fall in 2008 due to the global financial meltdown and fell further during 2009 and 2010. After a short lived recovery in 2011, house prices fell again in 2012. Before long, however, house prices recovered, rising strongly in 2013 due to government initiatives relating to the property market. Strong price hikes continued in 2014, although the increase slowed at the end of that year. According to the Central Bank of Malta, Maltese property prices rose 8.53% during the year 2015 to the fourth quarter. During the latest quarter of 2015, property prices increased by 8.86%.
The influx of foreign nationals moving to Malta, be it to retire, to relocate or to work here, has also paved the way for a new golden opportunity – rental investment. The growth of niche industries such as gaming, pharmaceuticals, back-end office operations, international insurance companies and financial services has led to a strong surge in demand for rental properties. This economic growth is set to continue – in particular, the island expects to actually do well as a result of Brexit, as it is an English-speaking EU country with a similar legal structure to the UK and an attractive tax regime – making it a likely candidate for EU-facing businesses looking to relocate out of the UK. Local demand also remains a strong contributor.
Finally, Maltese property structures are subject to more attractive tax arrangements than many other jurisdictions offer. Specifically, Malta does not impose real estate taxes such as council tax and rates, and also there are no wealth taxes. For rental investment properties, Malta also offers an optional special 15% tax regime for rental income which now extends to both residential and commercial properties.
In today’s ever fluctuating economy many people have already seen the investment potential, which is two-fold: holding property as a secure investment that will retain its price and appreciate in the long term; and a steady stream of income in the form of rental payments. Factor in the excellent choice of good value property available at the moment and the attractive interest rates on home loans, and investors would be wise to take Malta very seriously as a property investment jurisdiction.
If you are interested in Malta, why not take a look at our complete guide to gaining EU citizenship via Malta?