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Investing in Malta- A Property Almanac
Malta has long gained a reputation for a high standard of living with a Mediterranean flair. With the introduction of various programmes related to the attainment of citizenship or residency, many foreign investors have eyed the island as an ideal European solution for immigration purposes with vast potential for stable investment in real estate. In this article Dr Maria Chetcuti Cauchi presents an analysis of the real estate market and laws through 2015 and 2016, with a view of giving an exposition of the process for property acquisition and resale.
Malta offers a unique style of living. The island offers a fusion of various interesting elements including a stable political environment, a multilingual workforce, English as an official language, a unique relaxed lifestyle, reputable financial services, strong corporate & business solutions, a temperate climate, a Mediterranean cuisine, an intricate past laced with noteworthy historical happenings, local character and an attractive fiscal framework. All this has resulted in elevated foreign interest in the island, most noteworthy in the property market.
During the global financial crisis that hit most countries in the last decade, many investors have sought safer ways to protect their income and investments. With an increasing number of investors strategically planning ahead and looking into alternative solutions, the worldwide trend was to invest in property. Yet 2010 heralded a realty hit in most countries, yet it was interesting to note that, at a time when even most European property markets experienced a downturn, the Maltese realty market earned itself a coveted reputation for being relatively steady, constant and with a first-rate return on investment.
Even though 2008 signalled a relative fall in the Maltese real estate market, mainly due to the global financial downfall and even though late 2012 did witness a short slump in property prices, yet this nosedive was very temporary for Malta. In fact during the year to end-Q1 2013, Maltese property prices fell by just 0.6% (-2.42% inflation-adjusted). On a quarterly basis, property prices rose by 1.54% (3.28% inflation-adjusted) in Q1 2013. 2014 then witnessed a substantial increase, which increase was partially attributable to the very successful Malta Individual Investor Programme (MIIP), introduced by the government in November 2013, which programme targeted high net worth individuals seeking to obtain citizenship by investment in a European jurisdiction.
Having said that, the MIIP was not the only reason for this success. In general, Maltese property holds its value very well and has experienced exponential growth for decades. This, in addition to the stamp duty exemption for first-time buyers on the first €150,000 of their new property’s value (which had been extended till 30 June 2015) as well as the property tax exemption for sellers who have owned and occupied the property as their own residence for a period of at least three consecutive years, have all contributed to this growth.
In the last year or so, most property types in Malta have experienced price hikes:
- apartments had a 7.17% price increase during the year to Q3 2014. Prices actually went up by 6.44%, when adjusted to inflation;
- terraced houses rose by 5.89% (5.18% inflation-adjusted) y-o-y in Q3 2014;
- maisonettes, on the other hand, had a slight price drop of 0.42% (-1.09% inflation-adjusted) y-o-y in Q3 2014;
- other properties consisting of townhouses, houses of character and villas, experienced the highest price increase of 16.17% (15.38% inflation-adjusted) during the year to Q3 2014.
2. The Process
Purchasing property in Malta is a process that is marked with certainty. Any transfer or change of title in relation to immovable property, being a title emanating from a real right, must be undertaken through a public deed, which is a contract signed in the presence of a notary public, and registered in the Public Registry. Searches for the verification of title are also undertaken therein and lease hold titles and usufructs are also registered in a similar manner.
Practice is such that, searches in the title of the property are undertaken before the actual transfer of ownership is done, thus ensuring that the seller is entitled to sell and that there are no encumbrances or claims on the property. These searches are usually undertaken and vetted by the notary and the legal representatives of the purchaser. On the searches being undertaken, a purchaser may choose to obtain a title report from the notary guaranteeing title for five years. The guarantee is not given by the State, but by the notary himself who carries the status of a public officer in Malta.
In addition to the above, the Malta Civil Code provides for the implied warranty of peaceful possession afforded by the seller to the purchaser. It is custom that in the final deed of sale, whilst warranting peaceful possession and good title to the property, the seller, by way of guarantee of such, constitutes a general hypothec on his/her property present and future, in favour of the purchaser.
The process comprising searches, root of title guarantees, registration and enrolment in a public registry, grant any local and foreign buyer a level of certainty and transparency that is obviously paramount when investing in real estate on the island.
Specially Designated Areas
We would like to end by placing particular focus on Malta’s Special Designated Areas (SDAs). These are prime residency areas where the conditions of acquisition are the same for Maltese and foreign residents, with the intention of providing top-end facilities and amenities to buyers within the same location.SDAs provide an exception to the rules on residency permits in Malta, in that non-Maltese purchasers may buy property with the same rights as Maltese citizens, thus not requiring a special permit from the Maltese government. Essentially this means that purchasers, whatever their nationality, are exempt from the requirement of obtaining an Acquisition of Immovable Property (AIP) permit. Once such property is acquired, it may be leased out without any restrictions. This has obviously resulted in a very effective and profitable product for foreigners who want to invest, speculate and lease out a diverse property portfolio without suffering any restrictions that would normally be imposed on property located out of the SDAs.
Malta is a pro-investment and pro-business jurisdiction. All stakeholders, including banks and various administrations, have all sought to provide solutions and products that encourage and attract FDI into the country. The success of the property market is evidence of this approach. The country seeks to reach a balance between ensuring propriety whilst at the same time cutting down on bureaucracy and red-tape. Yet this is done without forfeiting important elements such as financial reputability, proper due diligence on investors, soundness of borrowers, certainty of root of title and more. A mix of all the above elements has resulted in a relatively affordable andbuoyant property market.
All this, coupled to the other advantages the island can offer the new expat, including a vibrant network, safe environment and now even the possibility of Maltese citizenship, have labelled the island as the best, current European personal living solution.
This article is intended to be of a general nature and is not intended to address the specific circumstances
Co-founding partner, Maria is the partner in charge of the Corporate law & Regulated Business Units of the Firm.
On a day to day basis, Maria’s team advises an array of clients on regulatory issues, compliance matters, commercial and finance transactions and corporate governance issues in general. Maria has vast experience of start-ups, corporate restructurings, takeovers, mergers, privatisations, and equity and debt financing structures. Maria’s team regularly handholds banks and financial services companies on the procedure to set up in Malta, the compliance and regulatory aspects of their business including client intake and due diligence, ongoing compliance procedures, reporting and general regulatory observance matters.
Maria’s pet subject centres around the application of traditional notions of Intellectual Property Financial Services Law to the online world, as well as the conversion of brick and mortar notions to cyberspace. These mostly include projects with a fusion of technology law and investment/finance law, such as payment gateways, gaming operations, e-money institutions and ICT online operators.
For more information about investing in Malta and property in Malta, please read:
Figures released by the Central Bank of Malta (CBM)
House Prices in Malta continue to Rise, Global Property Guide, 23 January 2015.