Often referred to as a Mediterranean gem, the Maltese archipelago has long been a popular tourist destination, and at face value, it’s easy to see why. Blessed with clear, deep blue waters and at least 300 days of sunshine a year, it’s a short, relatively cheap getaway for many living in neighbouring countries. Its rich history, vibrant nightlife, fresh seafood, multilingualism, and charming Mediterranean architecture only add to its appeal. Malta also has a relatively strong economy, is well-connected to other EU member states, and is pro-retiree, boasting government-provided retirement and residence programmes. To acquire residence in Malta is to acquire it indefinitely, and for non-EU members, the added appeal is free access to the rest of the EU. Citizenship will tack on the benefit of visa-free access to Schengen areas.
These are just a few of the many reasons why some visitors decide to obtain a more permanent foothold on the islands by purchasing a piece of property there. The majority do it with the intention of calling Malta (or Gozo) their new home, while others might just buy a getaway home for frequent breaks from their respective countries. Others still might have more lucrative intentions, and invest in a rental home. Whatever the case, Malta and Gozo’s real estate market offers a host of options to suit everyone’s needs. While peaceful and happening areas can be found on both islands, it’s safe to say that Gozo is the serener – and more economical – of the two, and is the go-to for those looking for more space and tranquillity. Malta is the more well-connected and exciting sister, so while peaceful neighbourhoods with spacious homes might be harder to come by, it’s easier to get to places of interest and/or importance. Historical homes, be they farmhouses, terraced homes, palazzinos, or houses of character, are abundant on both islands, so be sure to mention your interest in owning a piece of history when conducting your property search, so as to avoid having your time wasted looking at modern houses and apartments.
The cost of living in Malta and Gozo
There’s no denying that the global pandemic and other recent woes have affected the world’s economy. Malta was not spared. Despite the resulting increase in living costs, the Maltese islands are still an attractive option for many seeking the island life in a warm climate, as government-provided healthcare and education are available for all citizens of the EU, EEA, and Switzerland. Transport, both public and private, is also very affordable due to Malta and Gozo’s size. Real estate, while comparable to that of other major European cities, remains a wise investment as property prices continue to rise steadily; the rate of homeownership is currently at 80%.
Property purchasing requirements for foreigners
Non-Maltese nationals are subject to a list of criteria they must meet in order to buy property in Malta or Gozo, though these criteria differ slightly for EU vs non-EU citizens.
An AIP – Acquisition of Immovable Property – a permit that is usually issued within 35 days of a correctly submitted application along with a Promise of Sale or Preliminary Agreement and 2 passport-sized photographs plus a photocopy of the applicant’s passport (unless it’s not the applicant’s first Maltese property, in which case a copy of the deed of sale of the previous property will suffice), is required to be obtained from the Ministry of Finance by all foreigners wishing to buy property in Malta, with some exceptions:
- EU citizens are exempt from this requirement if the property is their first AND is intended to be their primary residence. They are not eligible for this exemption if they wish to purchase any property with non-residential intentions, or a second home that is not a primary residence; the latter reason does not apply in the case of them having resided in Malta for more than 5 years.
- Another exemption from having to acquire the AIP, for both EU citizens and third-country nationals alike, is if the property is located in an SDA (Special Designated Area). It’s important to note that it’s illegal to rent out properties acquired with an AIP. Furthermore, upon completion of a sale, the governing authority will expect a copy of the notarized deed.
There is a one-property limit (which has to be used as a primary residence) for all third-country nationals, unless the property is situated within an SDA. Foreign investment is encouraged in these areas, and as such, no limit is imposed on the number of properties a foreigner can buy in an SDA. In fact, those who opt for an SDA property can expect the same property rights as those of a Maltese citizen.
Third-country nationals are legally obligated to obtain the necessary visa or work permit in order to work in Malta or to simply stay in Malta for more than 90 days. EU citizens are exempt from this requirement, although they will need to apply for a residence permit if they wish to stay indefinitely. Third-country nationals can circumvent this criterion if they qualify for the Malta Citizenship by Investment Program, a program aimed at high-income individuals with the financial ability to make the required investments.
Third-country nationals have to meet minimum value requirements, which differ depending on the type of property being bought and the area of the country it’s being bought in, and which are subject to change from one year to the next. EU citizens are exempt from this requirement.
Worth noting is that third-country nationals married to EU citizens jointly purchasing a property will have access to the same rights as their EU spouses.
- Foreign nationals renting out property in Malta and Gozo are subject to a 15% income tax on all rental income, and are restricted insofar as to what kind of property they can rent out, the value of said property, and to whom they can rent them out to (short-term renters only).
Property purchasing requirements for foreigners and locals alike
Anyone wishing to purchase a property in Malta or Gozo will need to hire a notary public and possibly a lawyer specializing in Maltese property law. These figures assist with many of the legal steps in the buying process, including conducting property searches, mediating the transaction between seller and buyer, searching a property’s legal title in the Public Registry and Land Registry, and submitting a final agreement to be drafted, signed, and registered with the Public Registry.
A Promise of Sale, locally known as a Konvenju, is a preliminary agreement, entered by seller and buyer once a property of interest has been determined, specifying a transaction completion timeframe (typically 3 months) as well as any agreed-upon terms and conditions, the satisfaction of which will result in the buyer receiving the keys to her/his new home.
The signing of a Final Deed of Sale will take place at the notary’s office or, in the case of a mortgage, the bank office. Any outstanding debts and fees must be settled at this meeting.
Any intended changes to the purchased property will have to first be run by the Planning Authority; the official website provides details regarding permits and other factors necessary to keep one legally compliant throughout the process of making these changes.
It’s highly recommended for prospective buyers, both foreign and local, to hire a surveyor and architect to have the property in question and its building permits, if any, properly analysed before committing to buying it, especially in the case of older, traditional, Maltese stone houses.
Applying for a Mortgage in Malta
Expats who wish to take out a mortgage in Malta, after obtaining permission from the Central Bank of Malta, must open a Maltese bank account and ensure to keep it active. This is to be followed by taking out life insurance, among other kinds of insurance that might be requested by the bank of choice. Supporting documents, such as ID, proof of address and income, are typically expected to supplement a mortgage application. Foreigners can expect an LTV (loan-to-value) ratio of around 80%.
Aside from the cost of the property itself, approximately 10% of which has to be paid as a deposit upon signing the Konvenju (forfeited to the seller in the case of an incomplete sale without just cause), there are other expenses one must factor into his/her budget:
- Stamp Duty (Malta’s property tax): 5% (2% for properties in Gozo at the time of this article), 1% of which has to be paid alongside the 10% deposit at the Konvenju; the remaining 4% is payable upon the signing of the final deed of sale.
- Notary fees: approximately 1-3% of the total value of the property
- AIP permit fee (if applicable): €233
- Registration & search fees: up to 1% plus 18% VAT
- Architect fee: between €200-€500
- Financial advisor fee (for tax management): varies
- Surveyor fee: varies
- Mortgage fees: vary
- Insurance fees: vary
- Translation fee (if applicable): varies
- International bank transfer fee: varies
- Property negotiator fee: varies
- Ground rent (if applicable): varies
Other relevant information
The search for property in Malta or Gozo
Finding a suitable property in Malta or Gozo is typically done through either estate agents (some of which specialize in helping foreigners purchase their first property on the archipelago) or via online “match-making” programs, which connect sellers with prospective buyers. However, it’s not uncommon for homeowners to have found their ideal home via word of mouth, via online or print classified ads, or by having seen a “for sale” sign on the property itself.
It’s worth noting that estate agents collect their fees from the seller for providing a service from the beginning to the end of your property search. They also provide you with assistance in all decision-making throughout the property journey.
Ground Rent (Cens)
An archaic concept still prevalent in Malta, ground rent is a rent the buyer keeps on paying the seller – sometimes temporarily, sometimes permanently – regardless of the fact that the buyer owns the property, because s/he is “renting” the ground the property is built on, ergo the name. This arrangement does not apply to properties known as “freehold” properties. It’s worth noting that a buyer can release him/herself from paying ground rent by paying the seller 20 years’ worth of ground rent at the time of purchase.
Special Designated Areas (SDAs) or Lifestyle Developments
Alluded to earlier on in this article, SDAs or Lifestyle Developments are exempt from a host of restrictions, which makes them an attractive option for foreign buyers. Enhancing their appeal is the fact that these areas oftentimes boast luxury properties with highly desirable amenities, such as reception areas, underground parking, communal pools, seafront views, landscaped gardens, and spas. They’re also typically situated in prime locations, with restaurants and shopping centres within walking distance. All this and more make SDAs a popular choice for foreign and local buyers alike.
Consider a property negotiator
Real Estate Agents facilitate the property search by scanning the country for properties that match the prospective buyer’s criteria, catching flaws in properties omitted by sellers, and highlighting advantages in a property the foreigner might be unaware of. Taking this step might reduce one’s chances of buyer’s remorse.
Energy Performance Certificate (EPC)
An EPC is a certificate one must be sure to acquire from the previous owner. In the case of a seller not having one, it is her/his responsibility to apply for it and obtain it from an Energy Performance of Buildings (EPB) assessor before selling it. Once performed, an EPC will indicate a building’s carbon emissions; the lower they are, the more energy-efficient the building is. This certificate became mandatory for all dwellings in 2009, and must also be furnished when requesting permission to make changes to a property at the Planning Authority.
Practise caution with off-plan property
Properties under construction are referred to as off-plan. It’s crucial to bear in mind that final results could differ from expectations, and the property’s value might also decline during construction. It’s therefore ill-advised to make any payments on such property without a financial guarantee from a bank that’s authorized to offer one on off-plan properties. As long as all relevant receipts and proof of payment are retained, this guarantee will come into effect in the event of an unfinished construction. Off-plan contracts are usually written in the interest of the buyer; in the case of an unfinished or untimely construction (or in some cases, never started at all), developers are obligated to reimburse any payments made inclusive of interest.
Independent Legal Advice
Biased legal information as a result of realtor suggestions is a common occurrence. It is therefore advisable to appoint lawyers with no ties to any estate agencies and who are specifically well-versed in aiding foreigners buy property in Malta and Gozo. When choosing a foreign lawyer not domiciled in Malta, it’s important to ascertain that s/he has the necessary credentials to practise law in both Malta and the country in question.
Excel Homes understands how daunting this process may seem at first glance. We’re here to help facilitate your entire journey. Contact us to find your property.