While UAE has yet to start direct flights to this Mediterranean island archipelago, Malta has on Wednesday included the UAE on its list of 'safe' countries for tourism.
This means as soon as flights to this country take off, you might be able to take that much needed break with fair weather, crystalline beaches and social media worthy pictures. Or more so, proceeding ahead with that evidently wise plan to buy property in the island nation.
Centrally located in the heart of the Mediterranean, Malta offers year-round sun, a long history and a unique culture that combines southern-European elements liberally sprinkled with Arab and Turkish influences. Spread over small islands, the nation of Malta is a member of the European Union and also uses the euro as its unit of currency.
It has ferry links to neighbouring Sicily (Italy), and the island has a good network of international flights connecting to most centres around the Mediterranean. It’s little surprise that the island nation has remained a firm favourite for foreign investors seeking a second home or investment property in the sun.
Can a non-national buy property in Malta?
Yes. Malta is a member of the European Union and as such, a passport holder from any other EU nation is entitled to buy property there – but there are limitations.
Foreign nationals and EU citizens can usually only buy one property in Malta, and usually only for owner-occupancy, though they can buy more properties in “Special Designated Areas”. Special Designated Areas are areas listed by the government where non-nationals can buy more than one property. As such, they are areas with new developments, most usually condominium-type properties and are located in places such as Tigne Point, Portomaso, Cottoenra, Manoel Island, and Chambray. The property purchased must be used solely as a residence for the owner or for your immediate family, though guests may be accommodated in the property when the owner or a member of your family is in residence.
A second property may only be purchased after residing in the country for a minimum continuous period of five years.
Other foreign nationals, who are not citizens of the EU, are required to obtain an Acquisition of Immovable Property (AIP) Permit from the Ministry of Finance – a process that usually takes three months. You can view details on that process here: www.mfin.gov.mt. An AIP permit only allows you to purchase and own one residential property for you and your family's personal use. Additional properties may only be purchased if they are located in Special Designated Areas.
So, you’ve made up your mind that the islands of Malta are a good fit for owning or investing based on your needs and budget.
If you’re not sure, then visit the island, take time to rent a car and travel its small villages and towns to get a sense of the place.
Malta is home to large expatriate communities and visiting those areas and talking to people who have made the choice to relocate to Malta may help.
You should also check how your home currency fares against the euro. And you should start to familiarise yourself with the types of properties and just how far you money will go by checking property portals that specialise in the Maltese market. These include www.propertymarket.com.mt or www.justproperties.com.mt.
Here are some areas you could look into
With a population of 400,000 on an island 30 by 15 kilometres, the island of Malta has the highest population density in Europe. But don’t let that put you off – it is an attractive place to look at and a good place to live. A third of the land is arable agriculture, in low plains with occasional hills, while the coast has high cliffs punctuated by bays and beaches.
Valletta: The historic heart of the island, the city is compact and built in a baroque style that dates back to the 1500s.
Vittoriosa, Senglea and Cospicua: Known locally as the “Three Cities”, these are located across the Grand Harbour and offer a slower pace of life.
Sliema and St. Julian’s: Just outside Valletta, these are fashionable areas with opportunities for both entertainment and employment. These are within Special Designated Areas (SDAs) where foreign nationals can purchase buy-to-let investment property.
Qawra, Bugibba, St. Paul’s Bay: These are popular locations too for expatriates seeking holiday homes close to beaches and the water.
Nazzar and Mosta: Inland villages that offer good value for money if your budget is on the lower end. Even then, because Malta is a small island, these are just a few minutes’ drive from the sea.
Rabat, Siggiewi and Zebbug: These villages also offer excellent investment opportunities where prices start around €100,000 (Dh402,000).
Marsascala: This small seaside resort is set around an attractive bay.
Gozo: This is a small island loved for its calm tranquility and wide-open vistas stretching to the sea or to Victoria, the capital, sitting on high ground in the centre. Gozo has a population of 37,000, some 6,500 of whom live in Victoria. Around this sit 15 villages, and around these are farmhouses. Paths and narrow roads lead down to bays and beaches, many of them sandy.
Are you going to pay for this with your savings or borrow?
Then choose a bank or a lender for options. Following that, you also need to talk to them about transferring money overseas to make payments – the best options in terms of rates, charges, etc.
The process of buying property in Malta
- With estate agents speaking English and the distances so short, buying property in Malta is easy.
- Estate agents don’t need to be licensed and fees are paid by the seller. There is also no language barrier and this extra transparency helps prevent differences between the prices you pay as a foreigner and what you would pay as a local.
- Agent fees are generally between 3.5 and 5 per cent of the property cost, paid by the seller.
- There is also the option of buying through a “sensar”, a kind of freelance property finder. A sensar should know his or her local area well, putting them in a good position to pick up property before it comes to market and use their local knowledge to negotiate you a good price. They also only charge one per cent to the seller and one per cent to the buyer. “Sensara” is the Maltese word for broker. There are sensar offices located in most towns across the islands of Malta.
- When you locate the right property and have negotiated a price – via the estate agent or directly – which is accepted by the seller, the first legal process is the Promise of Sale agreement, known locally as a konvenju.
- This is a binding contract, which specifies a date by which everything must be completed.
- Malta uses a continental-style notary system for legal processes, and as purchaser, you have the choice of notary. The notary draws up the konvenju, which will include details such as the price, items included within the price such as furniture that the seller may include in the sale, work that may be required to be completed by the seller, the payment schedule and conditions, and the timescale for completing the purchase.
- Employing a notary does not mean that you can avoid paying a lawyer. It is highly advisable to have your own specialist property lawyer. You can also grant your lawyer power of attorney if you want to avoid coming to Malta to sign every document.
- When signing the konvenju, a buyer must pay a deposit, usually of 10 per cent of the property price.
- Buyers must also pay a further 1 per cent of the selling price as a down payment of the eventual 5 per cent stamp duty to the notary. Like most of continental Europe, Malta uses the notary system. A notary is an independent legal professional with less standing than a judge who can arbitrate minor matters. The rest of the stamp duty will be payable on signing the final deed.
- After you have signed the konvenju, the notary will carry out the due diligence checks and research to ensure the legal titles are in place and there are no debts or liens outstanding on the property.
- During this time, the buyer can ensure that all their personal paperwork is in place.
- If the buyer pulls out of the deal without a good legal reason, they will forfeit the 10 per cent deposit.
- The Promise of Sale agreement lasts for three months, so at any point before this time, when due diligence is completed, a date will be set to sign the Final Deed at the notary.
- The deed will be read out and, if satisfactory, all the parties sign it. The remainder of the selling price is transferred at this point, along with tax, stamp duty and the notary’s fees. The buyer then receives the keys.
- Within 15 days, the notary will record your ownership of the property at Malta’s Land Registry.
Konvenju: This is the local term for the Promise of Sale agreement.
Don’t get confused by the paperwork involved
As with all major decisions, professional advice is important. That’s why it is vital you hire the services of a lawyer to assist you in your purchase and protect your investment. It’s important to remember these details:
- EU citizens may purchase one property in Malta or Gozo, though more properties may be bought in Specially Designated Areas.
- The property purchased must be used solely as a residence for the owner or for his immediate family, though guests may be accommodated in the property when the owner or a member of his family is in residence.
- The property may not be rented out, except for villas with a swimming pool, which may be considered. A second property may only be purchased after residing in the country for a minimum continuous period of five years.
- Other foreign nationals, who are not citizens of the EU, are required to obtain an Acquisition of Immovable Property (AIP). An AIP permit only allows you to purchase and own one residential property for you and your famil's personal use. Additional properties may only be purchased if they are located in Special Designated Areas.
- The first step in purchasing property in Malta is to hire a notary public. A notary is an independent legal professional with less standing than a judge who can arbitrate minor matters. He will lodge the Application for Immovable Property (AIP) on behalf of the buyer (if required) and assist in the buying process as well.
- Once a property has been chosen, contact the seller or estate agent to make an offer. Upon acceptance, the notary will be responsible for drawing up a purchase agreement – also known as a konvenju.
- Upon signature of the contract, the buyer pays 10 per cent of the selling price as deposit.
- The 1 per cent stamp duty must also be surrendered to the notary public for registration of the purchase agreement and payment to the Commissioner of Inland Revenue.
How long does it take to close a contract?
Days is the usual timeframe to close a property deal
The entire process can be done in less than 90 days – and 60 days is the more usual timeframe, though the process can be concluded in 30 days, depending on the urgency of the situation and the agreement of both sides to expedite the process. Within 15 days of the exchange of money and stamp duty to conclude the sale, the title deeds will be submitted to the Land Registry department.
Fees, taxes and duties
As a general rule, purchasers should allow for a further 8 to 10 per cent of the purchase price to cover expenses and fees.
Of purchase price to be paid in fees, expenses
- Stamp duty: Stamp duty on property transfers is generally levied at a flat rate of 5 per cent on the property value. The provisional stamp duty of 1 per cent is payable when the notary registers the promise of sale with the Inland Revenue Department (IRD). The remaining stamp duty of 4 per cent is payable within 15 days after the signing of the final deed of sale.
- Notary fee: This fee generally ranges between 0.25 to 0.5 per cent of the property price. On a property value up to €500,000 (Dh2,000,000), the fee is 0.5 per cent. On properties above that figure, the fee is 0.25 per cent.
- Registration fee: This is based on the legislated registration fee schedule and varies according to the value of the property. For properties priced between €69,881.20 (Dh283,015) and €93,174.94 (Dh377,353), the fee is €46.59 (Dh188). For every additional €23,293.73 (Dh94,338), it rises by €9.32 (Dh37.74). These rates, however, change regularly. Your lawyer will be able to advise you of the actual cost.
- Value-Added Tax: As with all EU countires, VAT is applicable on professional services such as notary fees on the services provided by a lawyer.
- Legal fees: There is no set charge for the services of a lawyer, but a general rule of thumb is between €1,000 (Dh4,000) or 1.5 per cent of the purchase price, plus VAT of 18 per cent.
What can go wrong?
The property-buying process in Malta is pretty straightforward. Using a good lawyer with local knowledge protects your investment and avoids the pitfalls if things have the potential to go awry.
Don’t participate in any attempt to lower the agreed sale price in an effort to avoid taxes. In these cases, the seller asks for the difference between the stated sales price and what you’ve agreed to be paid in cash – “black money”.
There are legal and financial implications on participating in such an activity. If you’re asked for “black money”, refuse and walk away from the deal if necessary.
Because Maltese real estate agents don’t have to be licensed, you need to be careful. That’s why hiring a lawyer protects you and your hard-earned investment funds.
What you need to know
Malta has always been a natural hub for relocation. Ever since the 1994 Malta Permanent Residence Scheme and more recently the renewed schemes, Global Residence Programme and the Malta Residence Regulations 2014, the country has seen a steady interest from EU and non-EU nationals purchasing real estate as one of the criteria to obtain the residency status. The benefits of becoming a resident not only provide a special tax status of 15 per cent but also allow non-EU citizens to have freedom of movement within Europe and Schengen countries.
Risk: According to international financial firm KPMG’s report issued in October, shoddy finishing on some projects has tainted Malta’s reputation and fails to meet the expectations of high net-worth investors.
Overall, though, the Maltese real estate market has, in recent years, been a European success story and has experienced five years of consecutive growth both in terms of the number of transactions and in overall volume.
Property options that suit your budget
Foreign buyers tend to favour the north-east coast of the island. The historic heart of Valletta is a compact and beautiful city, built in a baroque style in the mid-1500s. At the top end of the scale are renovated palazzos: large, roomy townhouses built for the nobility around courtyards, and with price tags well into seven figures. There are also apartments available from under €200,000 (Dh800,000) just a few steps from the buzzing café culture of the old town.
In terms of value for money, Malta offers some attractive deals at multiple entry points for every investor. Do keep an eye on the dirham to euro exchange rate, now almost exactly four dirhams to the euro.
Even with this level of investment, you can own a little piece of Malta. Fancy a small traditional house or small apartment in Senglea or Cospicua? Just across the Grand Harbour from Valletta itself, there are many properties that are affordable. And while they may need a lick of paint or some other work, you have plenty of opportunity to enjoy the lifestyle there, between plumbing and painting. Keep an eye out too in the villages of Rabat, Siggiewi and Zebbug, where prices start at that figure.
Sliema and St. Julian’s, just outside Valletta are within your budget. Portomaso and Tigné Point, plus the new and Fort Cambridge in Sliema and Pender Gardens in St Julian’s are within Special Designated Areas (SDAs) where foreign nationals can purchase buy-to-let investment property. Although the largest apartments here can cost €5 million (Dh20 million), there are also apartments well within your investment range. For something different, look to the villages on the smaller picturesque island of Gozo, where a house is well within budget.
The sandy beaches of Mellieha have proved popular for foreign buyers and it has a flavour of “old-style” Malta that retirees seem to appreciate too. Fancy a beautiful sandy beach at the doorstep of your two-bedroom air-conditioned apartment there
Fort Chambray, set within an actual 250-year-old fort overlooks the harbour at Mgarr. Prices start at around €185,000 (Dh749,000), so you’ll have your pick of high-end properties there.
With this level of investment, you’ll pretty much have 75 per cent of the properties for sale on Malta to pick from. A filly modernised converted palazzo close to the centre of Valletta?
A large apartment with a sea view in Qawra, Bugibba, or St. Paul’s Bay. Gozo has won many awards for sustainable tourism, so don’t expect the brash resorts of other Mediterranean islands. Property is primarily in farmhouses or townhouses of character in the villages, fully restored and modernised, with change left in your pocket.
Do Maltese banks assist foreign buyers investing in properties?
As a general rule, if you hold a passport from an EU or European Economic Area nation, banks in Malta may consider your mortgage application. Expat applicants can normally expect a loan-to-value mortgage of 80 per cent and offer sums of between €25,000 (Dh100,000) to a maximum of €1,000,000 (Dh4,000,000). Because the UK has left the EU, Maltese banks may reduce that loan-to-value level for Britons. Generally, non-EU or European Economic Area nations – Norway, Iceland, Lichtenstein and Switzerland – cannot be financed for property purchases.
Loan-to-value rate on mortgages for EU citizens
The rental market
If it’s your intention to purchase a property in Malta to generate rental income, it’s important to remember too that these properties can be rented out only if the property is valued over €233,000 (Dh943,500). It must also have a swimming pool and is registered with the Hotel and Catering Establishments Board. Even then, foreign-owned properties can only be rented out for short-term lease agreements.
Beware of these scams
- Real estate agents in Malta are not required to be licensed. Be careful. Use a reputable real estate agency – the big international brokerages have franchises on the islands and these generally conform to a code of practice.
- Beware of using a “sensar”, a kind of freelance property finder. Because they are paid by both parties, they are eager to get things done. Don’t let their interests override your interests as the purchaser.
- Shoddy finishing can be an issue with newly built developments. If it looks shoddy, it is. And that means problems – and problems cost money. If you’re not happy, don’t buy. Take your blinders off and look closely at what you are buying. If a development has been empty for a while, that tells you something. Ask why?
- Don’t participate in any attempt to lower the agreed sale price in an effort to avoid taxes or if the seller asks for cash under the table. There are legal and financial implications on participating in such an activity. If you’re asked for “black money”, refuse and walk away from the deal if necessary.
- Most importantly, never pay for anything if you do not get a solid and concise contract that protects your rights as a buyer.