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The Malta Property Landscape - April 2023 Edition

The Maltese government has once again extended the tax reduction scheme on property transfers. Through this scheme, the first €400,000 of a property’s value will be subject to a reduced tax rate of 5% as well as a 1.5% reduction on stamp duty.

In recent years, concerns about housing affordability in Malta have become more pronounced due to the escalation in property prices. In essence, housing affordability relates to an individual’s ability to pay for housing – a basic human need. When housing affordability is being discussed, one could consider whether an individual is able to rent a property; or their ability to purchase a property in their lifetime. Here we are talking about the latter.

Housing market outcomes are the result of the interaction between user demand and supply of housing. For several years, additional housing demand exceeded additional housing supply leading to exceptional growth in selling prices. However, over the past two years, house prices grew at a slower pace. Thus, understanding the historical and expected developments in the demand and supply of housing is key for anticipating likely developments in the selling price of housing units.

For many years, the Maltese rental market was constrained by rental regulations. In the years preceding 1995, the Maltese property market witnessed excess property demand. This required property owners to either rent out their vacant property at below-the-market prices, or else sell their property. Many lessors followed the second course of action, resulting in a higher tendency for lessors to sell their property rather than rent.

The Maltese housing market has had an exceptional few years. In fact, the price increases have been so substantial that a property purchased in 2013 at €130,000 would cost €260,000 in 2022. This means that the housing prices have essentially doubled in a mere nine years.

Real Estate Investment Trusts (REITs) are companies who own and manage various types of properties. These companies earn regular income through the rental of these properties which is then distributed to shareholders in the form of regular dividends. The companies also offer investors the potential to gain from the long-term appreciation of properties within the company’s portfolio.