A common practice to keep your savings growing, and level with future inflation is through investments. With the booming tourism in Malta, and the efforts of the Maltese Government to further foreign investments (i.e. Malta Individual Investor Program or Malta IIP), the real estate industry is at an all-time high. Potential local and foreign investors are a few steps away from securing their prospective return of investments, but, a lingering question lies: how do you go about investing in the property market in Malta?
Knowing and understanding the specific investment
Investors should be well-informed with the investment type they are to undertake. The type of investment involved here is investment properties. Investment property fundamentally pertains to real estate property that has been acquired for its potential return of investment by means of future resale or rental of the estate. The conventional way of gaining from this investment is by renting or leasing the property which essentially means a long-term wait for the return on investments; however, a popular real estate investment strategy practiced today called flipping renders a rather short-term return on investment.
Flipping allows property owners to renovate and redecorate the estate, inevitably leading to price appreciation. Capital improvements like property extensions cause price appreciation as well. Apart from these improvements, knowing how the hot real estate market works is another crucial concept and strategy to apply. The hot real estate market refers to scenarios where there are increases in home prices; decreases in inventory consequentially appreciating estates; and/or a favorable preference change (i.e. highly desired neighborhood).
Laws, Taxes, and Applicable Fees and Surcharges
European Union citizens, by virtue, are allowed to purchase one property off Malta or Gozo, with the exemption of purchase in Specially Designated Areas as in Chambray, Cottonera, Tigne Point, Manoel Island, and Portomaso. Properties bought must be used for residency, with exemptions of accommodating guests, but with the presence of the owner. Should another property be bought, compliance to a five-year continuous residency must be observed.
For non-EU nationals, an Acquisition of Immovable Property Permit must be secured. For the AIP to be granted, a minimum purchase of MTL 30,000 (€69,900) for apartments, and MTL 50,000 (€116,500) for different properties. Another property may be purchased on Specially Designated Areas only. To see available properties, contact real estate agencies like Malta Sotheby’s International Realty.
Transaction costs include provisional stamp duty, stamp duty, notary fee, registration and other fees, and property tax transfers. Other payables include real estate agent fee, and capital tax gains.
Calculating Return on Investment
ROI is calculated using the formula: ROI = (Gains – Cost)/ Cost; however, ROIs reflect basic calculations. A common mistake for investors upon calculating their ROIs is neglecting excess expenditures as insurance, taxes, and other improvements on their estates which significantly affect profit.
Keeping updated with the market
As reported April this year, the Central Bank of Malta (CBM) has calculated a 13.8% surge in property prices in the country during the fourth quarter of 2016. Accordingly, the surge was attributed to the implementation of the Malta IIP and the stamp duty exemption for first-time buyers. In addition, at 5% economic growth, Malta surpassed the projection of the European Commission (EC) which was at 4%. For year 2017, Malta was projected to be third in economic growth following Romania and Luxembourg.
The future looks bright
The future in Malta looks very promising with several new industries like Block chain, medical marijuana setting shop in Malta due to the legal framework, great weather and standard of living. Other established industries like the Malta citizenship by investment scheme, tourism, Igaming and the financial industries will continue to grow and flourish also with the help of the government policies and tax credit incentives.