Why invest in Malta’s Real Estate market?
Malta’s real estate market has remained buoyant year-on-year, with continuous development and investment in residential and commercial property. The market’s consistent growth presents lucrative investment opportunities for private High Net Worth Individuals and commercial investors seeking long-term gains.
In this article, we outline the environment in Malta and highlight the key trends driving its property market, which demonstrate why it is such an attractive location for investors or companies looking for a new home.
It also includes expert advice on structuring a business in Malta, best practices, and recommended resources for making a successful investment in Malta’s commercial property market.
Malta has a stable political, legal and economic environment, and as a member of the European Union, it provides citizens with access to live, work and study across 27 member states. These benefits, along with the beautiful Mediterranean climate, high living standards, and free healthcare, attract more individuals every year to apply for citizenship through the available residency programmes.
Many of the programmes involve a requirement to invest in immovable property, resulting in a growing demand for residential property. In addition to this, as a global financial centre, the jurisdiction is a thriving hub for business which is a key driver behind the steady demand for offices and retail space.
Malta attracts significant investment in its financial services sector. The established landscape has led development in many other tech industries, including igaming, fintech, crypto and IT. Malta has become a jurisdiction of choice to develop a business or expand to and set up an additional office.
The country has a thriving tourism sector, with various investment opportunities in modern complexes, boutique hotels and restaurants. The consistent demand in the sector year on year has surged the country’s property value. As a result, prices have increased significantly, with average prices rising 5-7% per year and 15-20% per year in good locations, with returns on new developments at the excavation stage even reaching 50%.
Key trends of the property market in Malta
Demand is increasing due to the country’s robust economic performance and growth in key and new industries, including blockchain, digital assets, fintech, and iGaming. More foreign companies are choosing Malta due to its favourable tax system and highly skilled workforce, another major growth factor.
Major developments in areas like Sliema and St. Julian’s mean there’s a steady supply of new office blocks, spaces, and other commercial properties, such as modern complexes coming into the market.
The average cost of office space in Malta ranges from €120 to €200 per square meter per year. The average price of retail space ranges from €150 to €300 per square meter per year.
The market is seeing a growing trend toward mixed-use developments. These combine commercial office spaces with apartment buildings and complexes, which can also have other amenities, like gyms, co-working spaces, and convenience stores. There’s also a growing focus on sustainable and energy-efficient buildings, with many new developments integrating green technologies.
How to structure a business in Malta
Establishing a new business in an overseas jurisdiction or setting up another office is complex. To avoid costly mistakes and a lengthy process, find a partner, such as a Corporate Service Provider, that can offer bespoke consultancy to underpin your business’s specific needs. The experience in the regulatory environment and in-house expertise a CSP holds enables them to provide expert advice and close assistance to meet individual goals efficiently.
A brief overview of structuring a business in Malta, which can be managed by a CSP:
Choose the proper business structure: Choose from limited liability companies (LLCs), partnerships, or sole proprietorships.
Register the business: Register with the Malta Business Registry (MBR). Non-resident entrepreneurs may need to appoint a resident agent in Malta to act as a liaison with the MBR.
Obtain the necessary permits and licenses: Obtain relevant permits and approvals from the Maltese regulatory agencies.
Open a business bank account: Non-resident entrepreneurs may be asked to provide additional documentation, such as proof of residence and a tax identification number.
Obtain a tax identification number: Obtain a tax identification number (TIN) from the Maltese tax authorities.
Key incentives to invest in Malta’s property sector
Here are some key incentives that make Malta such an attractive destination.
The fiscal regime and tax relief schemes
The general rate of tax for companies in Malta is 35%, however a system of tax refunds and participation exemptions may result in shareholders of a Maltese company reclaiming 6/7ths, reducing the effective tax rate down to 5%.
Holding companies may avail themselves of a participating exemption, resulting in income from such holdings being exempt from tax altogether – 0%.
There’s no annual property tax, inheritance tax, estate duty, wealth tax, or property ownership tax. General stamp duty in Malta is 5%, with 2.5% in the sister Island, Gozo and 2% in heritage sites. The sale of a property tax is 8%.
Malta offers several tax incentives for property investors, including tax deductions for certain property investments. There’s also a stamp duty exemption for first and second-time buyers and those purchasing properties in Gozo.
The government recently announced a €10,000 grant, spread out over ten years, for first-time buyers purchasing a property valued over €500,000.
Competitive rental yields
Rental yields in Malta are very competitive, with average rental yields for commercial property ranging from 4% to 7% per annum.
Malta has a stable and growing economy. The country has a highly skilled workforce, strong economic ties to the European Union, and a commitment to fostering innovation in leading-edge tech and industries.
Malta’s location and excellent transport infrastructure provide easy access to Europe, North Africa, and the Middle East. It’s an ideal location for entrepreneurs who travel a lot or for businesses looking to expand into new regions and markets.
Residency + Citizenship schemes available
There are many residency + citizenship schemes in Malta available with various requirements.
Citizenship by Naturalization
The programme offers Non-EU, EEA or non-Swiss investors and their family citizenship for contributing to the country’s economic development.
The requirements involve 3 stages; providing an investment sum of either €750,000 to achieve citizenship within 1 year or €600,000 to achieve citizenship within 3 years; an investment of €700,000 in immovable property, or entering a rental agreement of a minimum of €16,000 per annum (either investment option must be completed for 5 years); and donate €10,000 to a philanthropic charity.
The Malta Global Residence Permit (GRP)
Non-EU/EEA/Swiss nationals can acquire a special tax status and residence permit.
Invest in property valued at a minimum of €275,000 (€220,000 in Gozo or the South of Malta) or hold a rental contract for at least €9,600 per year (€8,750 in Gozo or the South of Malta).
Malta Ordinary Residence Programme
Eligible for EU/EEA nationals, as well as nations from Switzerland, Liechtenstein, Norway and Iceland, after staying in Malta for three months, depending on;
- Demonstrated financial stability
- Employment or studies in Malta
- Family members present in Malta
- Physical address evidence in Malta through buying or renting a property
- Physical stay in Malta for at least three months
There are many schemes available which are available to view here; https://affinityco.com/resident-citizenship/
Financing options for commercial property in Malta
Common commercial property types in Malta include office space, retail units, industrial properties, mixed-use developments, and hospitality properties.
Investing in these commercial properties can be highly lucrative but require significant financial resources. Large, state-of-the-art office spaces in sought-after areas like Valletta list for more than €3 million.
When it comes to financing your commercial property investment, you have several options, including:
Mortgages: Mortgages for commercial property investments in Malta work similarly to residential mortgages. The terms vary depending on the lender, the property, the nature of your business, and your current financial position.
Loans: Commercial loans are an option for investing in commercial property in Malta. Typically provided by banks or other financial institutions, commercial loans for a property investment can be secured or unsecured.
Equity financing: Malta has a small but robust venture capital sector. As of 2021, there were 15 fully licensed venture capital funds in Malta, with around $601 million of assets under management. Equity financing is an excellent option for companies not qualifying for mortgages or loans.
Government grants: The Maltese government offers several grants and incentives for businesses and individuals investing in commercial property. These include grants for property renovation, tax incentives, and subsidies for energy-efficient or environmentally-friendly buildings.
Managing your commercial property in Malta
Managing a business and a commercial property will take up time, resources, energy, and people power. As such, outsourcing property management services to a specialised firm is often the smart choice, especially for smaller firms or newcomers to the island.
A specialised property management company will ensure the property is run and managed correctly, helping investors maximise their ROI.
A property management company will handle tenant management and retention, property maintenance, financial management, and marketing and advertising. They will ensure the building meets all legal, regulatory, and tax requirements.
Tips, expert advice, and best practices
Hire experts: Work with experienced real estate brokers, lawyers, property managers, and corporate service providers who know the Maltese commercial property market and have strong relationships with government agencies and regulators.
Diversify: Consider diversifying your commercial property portfolio to decrease risks and increase earnings. This can include investing in multiple commercial properties, locations, and tenants.
Rent, then buy: Many investors prefer to rent before purchasing commercial premises. It allows them to assess the location and the long-term viability of the investment before buying or entering any credit agreements.
Find a property manager: Work with an experienced and locally based property management firm. Effective tenant management, property maintenance, and financial management are essential. Efficient property management is one of the best ways to maximise your returns.
Stay up to date: Keep up-to-date with the latest news and market trends, including changes in the local economy, property valuations, and tenant demand, to maximise your return on investment.
Recommended resources for further research:
- Malta Business Registry: Provides information on registering a business in Malta.
- Malta Developers Association: Represents developers and other property-related professionals in Malta.
- Malta Chamber of Commerce: The Malta Chamber of Commerce provides support and resources for businesses in Malta, including information on the local business environment and opportunities.
Affinity Group, an experienced Corporate Service Provider
Affinity Group is the perfect choice for investors entering Malta’s commercial property market. We have extensive knowledge of the Maltese property market and strong relationships with the government, agencies and regulators. We can handle the entire process, including negotiations and paperwork, and will guide you through obtaining all the correct permits and regulatory approval.
Affinity Group’s Services:
- Incorporation of ownership structures
- VAT planning, compliance and administration
- Liaison with banks and advisors concerning financing the property
- Registration of mortgages
- Administration of the ownership structure
- Liaison with legal advisors and brokers in respect of purchase and sale
- Liaison with property management
- Liaison with tenants
- Maintenance of non-resident landlord status
- Preparation of budgets, periodic management reports and annual financial statements
- Statutory administration services