Malta Real Estate Market

The Maltese real estate market has, in recent years, been a European success story, experiencing three to five years of consecutive growth, both in terms of the number of transactions and in overall volume.

Unsurprisingly, a lot of this growth has been attributed to the arrival of so many foreigners, particularly those from the affluent gaming and finance sectors. This has created a demand from both local and foreign individuals, either looking to buy a home of their own or hoping to ride the wave of Malta’s rental market, where owning rental property is a lucrative business and a good return on investment is almost guaranteed.

A Growing Market

This positive trend has heralded a number of changes to the Maltese property market. You only have to set foot in the street to see that the amount of development around the island has boomed in recent years, with investors hoping to answer the demand for high quality commercial and residential properties. This has, in turn, pushed up rents and property prices island-wide but particularly in the commercial centres, most notably Sliema and St Julian’s, thus negatively affecting the lower end of the market in regards to affordability.

A Period of Stabilisation and Consolidation

Recently, and especially in light of some controversies at the tail end of 2019, there has been a lot of talk about the market slowing down or even dropping.

Kevin Buttegieg, Chairman of RE/MAX Malta, is not so sure this is entirely accurate. His view is that developers creating a top-notch product with a strong build quality will continue to sell or rent their properties with ease. The simple reality is that, with so much choice now, those who have cut corners or offer poor quality will be overlooked. The market is stabilising but there is still more than enough demand for good quality products.

The Challenges of Borrowing

One difficulty the Maltese property market has faced in recent times is the reduction in lending available from banks on the island. While conservative lending is, overall, a positive measure against future economic decline, what is happening is that young couples coming to the market for the first time are needing increasingly large deposits to secure their first home. The banks might be doing this to avoid negative equity later down the line, but it is important that the government supports these first time buyers to allow them to set foot on the first rung of the ladder.

The 2020 Budget

So what is the government doing to keep momentum going within the property market? And how are they supporting those most vulnerable to its lack of affordability?

When Malta’s Finance Minister, Professor Edward Scicluna, presented the 2020 Budget earlier in 2019, his forecast told a very encouraging story. With a 4.3% growth in GDP and a surplus of 1.4%, plus a debt to GDP ratio declining further to 40.4%, the projection for Malta’s economy is an extremely positive one.

Along with this projection, the government – as usual – laid out a serious of measures for the island’s property market. Here, we will look at these measures and the impact they have on the property market in the coming 12 months.

Helping First Time Buyerst

The first measures worth considering are the changes this year’s Budget has made to stamp duty eligibility and thresholds. Previously, the first time buyer’s scheme had a threshold set of 150,000€ but this has now been increased to 175,000€. This means that, if purchasing your first immovable property, you will not pay stamp duty on that first 175,000€ (thus saving 8,750€). You will then pay 5% on the remaining value of the property. If, however, you have previously purchased an immovable property such as a garage but this is your first residential purchase, you will pay a reduced rate of 3.5% on that first 175,000€.

The Budget then went on to reduce the taxable rate of stamp duty for individuals buying property in Gozo to 2%, while, for those buying in urban conservation areas, the rate remains at 2.5%.

These measures demonstrate the government’s desire to continue to support home ownership, while also highlighting the areas in which they are hoping to incentivise greater interest in the property market.

Helping Second Time Buyers

The Budget also announced a change to the taxation of profit on the promise of transfer of sale (or Konvenju). As of January 2020, sellers will be charged a 15% final withholding tax on the first 100,000€ of profit instead of the current 7% provisional tax. This measure will help second time buyers move up the property ladder.

Overall, the budget seemed to help a range of people on different rungs of the property ladder. It also mentioned a possibility of interest-free grants for first time buyers under the age of 40.

A Nation of Homeowners

Overall, it is clear that Malta remains a nation of homeowners. Maltese people like to invest in property, and the international market continues to see Malta as a very interesting investment prospect too.

After a period of intense growth there may well be time for stabilisation, which will see less quality properties languish on the market. However, with a continued growth in the island’s economy and many foreigners arriving each year in Malta, it looks as though the property market should expect to remain strong.

Furthermore, the government is continuing to take action into 2020 in order to support first time buyers and those with less access to costly homes.

What is clear, however, is that it is essential to take strong advice and expertise before dipping your toe into the market, and this is where a reputable property agent is essential. The Maltese property market is a strong one and, as such, it pays richly to know how to navigate it in the coming years. Speak to the RE/MAX Malta team today for advice.