Over the last 40 years or so, our company has kept statistics on property sales and prices and charted these. The direction is very obvious and for the most part, the market values increased at an average of approximately 8% per annum. Even when the rest of Europe experienced a crisis in 2008, the property values in Malta did not tumble in the same way, but rather steadied out for a period of time and are now on the rise again.
I would say that the main ingredients for such a healthy market are the following. An obvious factor is Malta’s size and the limited property stock available. Every year, there are approximately 10,000 – 12,000 property transactions concluded. The majority of these are to local buyers with foreigner buyers generally constituting around 10% of these sales. The Maltese are avid property investors and most Maltese own their own home. Even young couples tend to buy their first home as opposed to renting as happens in most of Europe. Anyone with spare cash very often opts to invest in the local real estate market given its consistent and reliable long term growth as well as the rental income potential. Sales to foreign buyers are extremely beneficial to the local market, and provide it with a healthy boost. Foreigners are made very welcome and a number of fiscal incentives are available to encourage foreign investment. However, the market is not dependent on them. Also, foreign buyers and local buyers integrate nicely and often a development of apartments for example, would have a good mix of Maltese owners and other mixed nationalities. This is an important factor as firstly, no development or location on the Island is dependent on any one nationality for its property sales. In Spain for example, the Germans, British and Spanish would not buy into the same developments as each other. Naturally, this means that the market is very restricted and completely dependent on a steady stream of buyers from one Nationality! The same applies for re-sales. Should a foreigner for example wish to re-sell their apartment, they are open to a wide range of potential buyers.
The local banks are very active in lending funds for the purchase of property and would lend anything from 80-90% of the value of the property. The banks are however cautious in their lending and will not lend unless they are comfortable that the loan repayments can be made in the long term. They also always verify property values independently. Thanks to this approach, the market experiences very few forced sales where prices must be dropped in order to repay the bank. We experience very few (if any) situations where someone just walks away from a property as they cannot afford the loan or because the loan is greater than the value of the property itself.
Another important factor is that local vendors are rarely under any excessive pressure to sell their home. Due to Malta’s size, job relocation for example does not mean that you need to move house, as would happen overseas where due to great distances, people are obliged to move home.
A final point is the extremely healthy residential rentals market which in turn has generated a huge buy-to-let investment market. Due primarily to the very beneficial fiscal conditions offered to foreign companies and their foreign employees operating out of Malta, there is a very large expat community most of whom opt to rent instead of purchase their accommodation. This has created a huge increase in demand for residential rental accommodation.
The above factors are the main points (there are of course others) that have helped create and continue to create a healthy local property market and the indicators are clear that this should carry on into the future.
By Grahame Salt