How to buy property in Malta

The Island's Real Estate Market

Both non EU and EU citizens are allowed to invest in real estate on the island. However, the purchase process might be a bit trickier than in other European states. Here are the key rules:

• It's mandatory to get the AIP (Acquisition of Immovable Property) permit. It costs €233 and it takes around one month to issue it.
• Foreigners are allowed to purchase only one property and use it exclusively for their residential purposes.
• Foreigners can buy only properties that cost more than the established threshold. The limits get updated annually and depend on the type of accommodation. For instance, it can be around €250,000 for villas and around €150,000 for apartments.

The good news is that there are Special Designated Areas (SDAs). The authorities encourage foreign investment in these regions — so you should be able to buy a second property without limitations. The standards of living are rather high in SDAs. You shouldn't expect to find the cheapest accommodation in such areas.

If you'd love to buy a commercial property or investment property to rent out outside of SDAs, discuss your situation with a legal expert. Probably, you'll find a way out.

The following types of properties enjoy steadily high demand among foreign investors in Malta:

• Apartments. When you start searching for your dream apartment, you'll be spoilt for choice. There are so many options on offer, in different parts of the island. It's the most popular type of accommodation among foreigners buying their first properties on the island.
• Penthouses. They are larger than apartments and cost more. Many penthouses boast breathtaking views. Even in late autumn and maybe winter, you'll be able to sunbathe on your terrace.
• Maisonettes. These are more budget-friendly than villas and offer outdoor spaces. Probably, you'll be allowed to customize this type of property to your needs. It's a perfect option for families with kids and pets.
• Townhouses. In this type of property, bedrooms are usually located on the upper floor. On the ground floor, there will be the kitchen, living room and other rooms to spend time during the day.
• Villas and bungalows. The former tend to have two floors and the latter only one. Both are often surrounded by patios and gardens. Foreign investors love them for luxury and privacy.

Residential property prices tend to increase by around 5% per annum. Business-class apartments can become 20% more expensive per annum at the construction stage. The amount of the rental income reaches 10% per annum. If you invest in real estate on the island, it should pay off nicely.

How to Buy Property in Malta and Get Residency / Citizenship

Wealthy expats can become the island's residents by buying a property worth at least €220,000. The price requirements might be higher, depending on the location. The become a Maltese citizen, they should invest at least €700,000 in real estate.

There are several investment programs to choose from. After you apply, the authorities will issue your residence permit within approximately half a year. Depending on the chosen program, you might be able to apply for citizenship as quickly as in one year.

Your family members can apply together with you. You won't have to spend any minimum required number of days per year on the island to keep your residency. You might be eligible for tax benefits. You won't have to obtain a visa to travel to other EU states.

The application process is simple and straightforward. The rejection rate is very low — if you meet the eligibility criteria, you might fail to get approval only if you forget to provide some papers or make mistakes in them. Malta might be not the cheapest location to get an EU residency and citizenship. But it allows you to reach the desired status faster and more hassle-free than most alternatives.

Which Locations to Pay Attention to

The Northern part of the island is better developed than the Southern one. In the North, the infrastructure perfectly suits families with kids who want to have schools, hospitals and entertainment facilities at their disposal. In the South, the real estate prices are lower and it's a great place for individuals who enjoy secluded life.

Expats adore Sliema and St. Julian's thanks to their metropolitan and at the same time relaxed vibes. Both cities are situated close to the ocean. The beaches are amazing and the scenery is picture-perfect. In the daytime, business life is thriving in both cities. After sunset, numerous bars and nightclubs open their doors. Sliema and St. Julian's aren't cheap. Be ready to pay from €300,000 for an apartment and ten times as much for a luxury penthouse or a villa.

Being the capital, Valletta is equally good for business, entertainment and cultural activities. It has well preserved its historical charm and unique architecture. Foodies can't stop praising its restaurants and art lovers will never get bored in its museums and galleries. The selection of properties on sale is always extensive. If you wish, you can become a proud owner of a historical palazzo for €5 million or more and restore it (or, get a restored one). A more modest apartment can cost around €300,000. The most coveted properties have a sea view. Besides, there are many worthy real estate options situated right outside the capital.

Gozo is a small island to the South of Malta. It lacks an airport so a ferry is the only means of transport that lets you reach Gozo. Here, you'll have the illusion of traveling back in time. You'll find yourself surrounded by rural landscapes and historic monuments, some of which were erected thousands of years ago. Tourists come here predominantly for the sake of diving. To buy a property in Gozo, it's enough to have €150,000 in your pocket. Maybe, a traditional farmhouse will attract you with its unique looks and vibes… Premium houses worth millions of euros are available too — but their choice might be not as wide as in Malta.

Marsaxlokk is one of the best spots for fans of village life. Fishermen live here and you'll be able to savor fresh seafood in multiple local eateries. On Sundays, find time to visit the open-air market where fish is sold. Plus, it's a delight to take photos of the fishing boats. Marsaxlokk is renowned for its tranquility. If you'd love to buy a premium house with €1 million or more, you should be able to find it in this area. However, most properties are more affordable: their prices start at €150,000.

Families with kids should consider St. Paul's Bay, Qawra and Mellieha. These areas are located in the Southern part of the island and ferries connect them with Gozo. The beaches are pristine and the air is incredibly refreshing. On the one hand, the local entertainment scene might be not as vibrant as in the main hubs in the North. On the other hand, these are unparalleled destinations to relax and enjoy slow life. The real estate prices are approximately at the same level as in Marsaxlokk.

No matter which part of the island you choose to settle down in, it will be convenient for you to travel from there all over Malta. You might not even need a car because it's very easy to rent one for a short term or take a taxi. Public transport is punctual and comfortable — a monthly pass will cost you less than €30.

In terms of telecommunications, Malta has an important competitive edge over most other countries: it offers nationwide 5G. The speed and quality of connection might differ depending on the location. If you need 5G for your work and everyday activities, it shouldn't be a problem to find a property where it's available. It's especially important for digital nomads and individuals who remotely supervise their international businesses.

Mortgage for Expats

Some banking institutions on the island give a mortgage only to local citizens. Others cater to foreigners as well. Typically, they will offer you these conditions:

• To qualify as a borrower, it's necessary to be aged 18-65
• You'll get up to 80-90% of the property's valuation or purchase price
• The sum of the loan will vary from €25,000 to €1,000,000
• You'll have 30-40 years to pay back the debt
• Feel free to choose from the variable or fixed rate (the latter can last up to 6 years)
• You can select from interest-only or capital and interest offers (the former tend to be available for up to 6 years and involve a large initial deposit)
• Interest rate will be between 3.15% and 4.75%

Only selected banks allow early repayment. Such offers often involve exit fees.

To apply for a mortgage, you need to open an account in a local bank and get permission from the island's Central Bank. The set of papers that you'll be required to submit includes:

• Filled-in application form
• Passport
• Proof of your address
• Proof of having enough funds
• Preliminary purchase agreement

If you have other debts, they shouldn't exceed 35% of your overall income after you add the mortgage to them. The lender might ask you to purchase life insurance and/or some other type of insurance too. The average price of annual insurance for a house is €500. For an apartment, it's normally up to €100.

Step-by-Step Guide on Buying a Property in Malta as Foreigner

To purchase a house or apartment on the island, stick to this algorithm:

1. Apply for AIP if you need it
2. Contract a notary, a lawyer and any other professionals whose assistance you might require
3. Find your dream property
4. Determine the terms of the deal with its owner
5. Sign a preliminary agreement with the owner
6. Transfer a 10% deposit and a 1% stamp duty fee to the owner
7. Apply for a mortgage if necessary
8. Wait until the notary double-checks the legal information about the property
9. Finalize the deal and transfer the remaining funds to the owner

In most cases, it takes around 3 months to progress from the preliminary agreement to transferring the keys to the new owner.

Tax When Buying Property, Owning and Reselling It

When purchasing real estate on the island, be ready to pay:

• €233 for the AIP fee
• 5% of the property's price as the stamp duty
• Up to 3% of the property's price as the notary's fee
• Up to €500 for the architect to inspect the condition of the property
• Up to 1% of the property's price + VAT of 18% of this amount as the registration fee

We won't discuss it in detail here — but, depending on your individual circumstances, you might be able to drive down the amount of the stamp duty. Even if you have to pay the full amount of 5%, you're allowed to transfer 1% after signing the preliminary contract and pay the remaining 4% within 2 weeks after finalizing the deal.

Plus, factor in the fees that you'll pay to solicitors, auditors and any other experts whom you may need to ask for advice. Most likely, you won't have to pay the real estate agent's fee from your own pocket because it's the seller's responsibility.

You won't have to pay a tax for the fact of being a property owner. However, selected buildings can be subject to ground rent. The notion of this fee came into play many years ago, when the government began to give land to people so that they could build accommodations there. Until now, these plots remain under long-term lease agreements. In this case, your scope of expenses will also include one year's ground rent (up to €250 per annum).

As we said above, expats are usually not allowed to rent out their Maltese properties. But if you manage to get permission for such a business, it will be subject to an income rate, which is 15% in most cases. The maximum possible amount of this rate is 35%.

When you decide to get rid of your house or apartment, you'll be allowed to resell them to a person of any nationality, regardless of their citizenship or residency status. If the property has belonged to you for over 5 years, you'll pay an 8% tax for reselling it. If you've been its owner for fewer than 5 years, the tax will be 5%.

Check your homeland's legislation to find out whether you'll need to pay taxes in the country where you come from for the real estate deals that you carry out in Malta.

Expenses Involved

Maintenance expenses depend on the property's size and type. For a regular apartment of 85 square meters, you'll have to pay around €100 per month for utility bills. Household bills for a business-class apartment can amount to €3,500 per annum.

Paperwork

To invest in real estate on the island, you should prepare the following papers:

• Passport
• Proof of having enough funds
• Proof of employment
• Proof of having no other outstanding debts
• AIP if necessary

If you're planning to apply for residency or citizenship, you'll also need to prove that you're in good health and have never violated the law. The exact list of papers and requirements will be determined by your goals and individual circumstances.