Malta means business
Mediterranean republic seeks investors to build finance and IT hub, writes Peta Tomlinson
A recent piece in an annual retirement listing proclaimed Malta as having "the best climate in the world". In 2013, the European Union's smallest nation - the republic of Malta, comprised of three tiny Mediterranean islands, Malta, Gozo and Comino - still ranks in International Living's top 10.
Favourable weather, English as the spoken language and a relatively low cost of living for Europe has positioned Malta as an attractive retirement destination, particularly for British buyers.
Today, Malta casts its net wider, targeting a younger, cashed-up foreign buyer, and particularly from non-traditional markets. The pitch is now skewed towards the vibrant business scene: Malta as a sophisticated business hub, especially for financial services and technology.
Online forex broker RTFX describes Malta as "a tiny hive of activity", with modern infrastructure, cutting-edge technology and a stable constitution. "Despite its size, Malta has developed into a happening nucleus for retail, IT and financial services activities," the firm says.
The Central Bank of Malta forecasts that 2013 will be a year of economic recovery, with gross domestic product growth climbing to 2.2 per cent. Domestic demand and an improving export sector are underlying factors, the bank says.
A property sector brushed by global economic headwinds also seems poised for an upturn. With property prices remaining competitive compared to rival Mediterranean locations, agents and developers are wooing cashed-up foreign buyers. At a recent series of high-profile seminars in London, Malta's Frank Salt Real Estate pedalled a property market that "has not only withstood the international doom and gloom, but which today indicates a positive appreciation, notably for investment properties". For the firm and its sister company, Homes of Quality, this was the sixth roadshow in major European countries since the final quarter of 2012. The company says this outreach is a response to a "tremendous increase" in interest from European countries.
John Cutugno, director of Malta Property Agents, says Malta has pursued the high-end overseas dollar for over 20 years. Whereas the focus initially was on wealthy retirees wanting a quieter life and more sunshine, the scenario has changed as the government tries to attract high-net-worth investors from overseas. "Instead of promoting only the good weather and rich history, we now promote the advantageous tax systems, modern infrastructure and relatively easy access to the rest of Europe, Middle and Far East."
Tax breaks include a flat 15 per cent income tax for anyone who is resident but not domiciled in Malta, and no tax on capital gains arising outside Malta. "The government also has double-taxation agreements with about 60 countries -including, I believe China and Hong Kong - for further tax savings," Cutugno says.
The bulk of foreign buyers still come from Europe, notably France, Germany, Ireland, Britain, Sweden and Russia. Cutugno notes "a marked interest" from Hong Kong and the mainland. "From an almost zero level, I personally have had two or three serious inquiries in the last month," he says.
For foreigners buying purely for investment, there has been "incredible demand" for office space. "As offices sprout [mainly by financial and gaming companies], so does the demand for rental property for their foreign employees. Buying property to let out is also an interesting option," Cutugno says.
Malta offers a choice of housing, ranging from modern villas, to restored historic houses. he says. "Malta is surrounded by sea, so a modern seafront apartment or penthouse might be a unique investment. If one is dictated purely by price, there are still a few locations outside the centres of Sliema, St Julian's and Valletta which are hard to sell, so with cash in hand one can make a great deal."
Neville Sciberras, manager of Dhalia Real Estate Services, says not all properties in Malta were affected by the slowdown. "Malta has remained relatively unscathed and the decrease in value [reported last year] did not affect all types of property in the same way. We have instances where certain quality properties in prime locations held on to their value and are still selling well."
On average, though, prices that had peaked in 2007 after years of boom have now come back to roughly 2005/early 2006 levels, Sciberras says. The days of speculation are over, he says. "Pre-crisis, it was very easy for someone to make a quick profit through speculation," Sciberras says. Not now, he adds, as "buyers are being much more cautious".
And if property sales did go down, this is not the case when it comes to the rental market, Sciberras says. "There is a very high demand for property to let. The average rental return is 5.5 per cent."
He agrees that the buyer demographic has changed. "[Previously], the majority of our buyers came from the UK, this is not the case any longer. The British market has slowed," Sciberras says. "To compensate, we have seen an increase from the rest of Europe - mainly Scandinavian countries, Italy, Netherlands and Germany. The Maltese islands have also become very popular with people from South Africa over the past couple of years, and we have had a rise in clients from Asia and the Middle East." He describes the local scene as still a buyer's market, where supply exceeds demand, although the gap is narrowing. Building permits have declined over the past couple of years, but the supply-and-demand ratio varies according to location.
"In certain areas, even today, it can still be a challenge to find property matching one's request," Sciberras says.
Most clients want a sea view, he says. "Seafront apartments in prime areas like Sliema and St Julian's are very much in demand and are a great investment. Old converted character houses with a courtyard or garden are also a good option for people deciding to settle in Malta. The majority of these houses are found towards the centre of the island."
While prices vary according to location, they remain relatively affordable, he adds. "One thing is for sure," Sciberras says. "Malta offers a great quality of life."
What you can buy for US$4 million
A "cream-of-the-crop" townhouse in the seafront town of Ta' Xbiex (pronounced tash bish), with views over the marina, historical Valletta fortifications and open sea. Features large rooms, palatial features and unique architecture. Prices range from US$1.5 million to US$4 million.
What you can buy for US$350,000
A sea-view penthouse in Mellieha, northwestern Malta. It features a front, back and roof terrace with spa pool; three bedrooms, designer kitchen and a large living space.