Chetcuti Cauchi Advocates | View firm profile
Malta has long
gained a reputation for a high standard of living with a Mediterranean flair.
With the introduction of various programmes related to the attainment of citizenship or residency, many foreign
investors have eyed the island as an ideal European solution for immigration
purposes with vast potential for stable investment in real estate. In this
article Dr Maria Chetcuti Cauchi presents an analysis of the real estate market
and laws through 2015 and 2016, with a view of giving an exposition of the process
for property acquisition and resale.
Malta offers a
unique style of living. The island offers a fusion of various interesting elements
including a stable political environment, a multilingual workforce, English as
an official language, a unique relaxed lifestyle, reputable financial services,
strong corporate & business solutions, a temperate climate, a Mediterranean
cuisine, an intricate past laced with noteworthy historical happenings, local
character and an attractive fiscal
framework. All this has resulted in elevated foreign interest in the
island, most noteworthy in the property market.
1. Facts
During the global
financial crisis that hit most countries in the last decade, many investors have
sought safer ways to protect their income and investments. With an increasing
number of investors strategically planning ahead and looking into alternative
solutions, the worldwide trend was to invest in property. Yet 2010 heralded a realty
hit in most countries, yet it was interesting to note that, at a time when even
most European property markets experienced a downturn, the Maltese realty
market earned itself a coveted reputation for being relatively steady, constant
and with a first-rate return on investment.
Even though 2008 signalled
a relative fall in the Maltese real estate market, mainly due to the global
financial downfall and even though late 2012 did witness a short slump in
property prices, yet this nosedive was very temporary for Malta. In fact during
the year to end-Q1 2013, Maltese property prices fell by just 0.6% (-2.42%
inflation-adjusted).[1] On a quarterly basis, property prices rose by
1.54% (3.28% inflation-adjusted) in Q1 2013. 2014 then witnessed a substantial
increase, which increase was partially attributable to the very successful Malta
Individual Investor Programme (MIIP), introduced by the government in November
2013, which programme targeted high net worth individuals seeking to obtain
citizenship by investment in a European jurisdiction.
Having said that,
the MIIP
was not the only reason for this success. In general, Maltese property holds its
value very well and has experienced exponential growth for decades. This, in
addition to the stamp duty exemption for first-time buyers on the first €150,000
of their new property’s value (which had been extended till 30 June 2015) as
well as the property
tax exemption for sellers who have owned and occupied the property as their
own residence for a period of at least three consecutive years, have all
contributed to this growth.
In the last year or
so, most property types in Malta have experienced price hikes:
- apartments had a 7.17% price
increase during the year to Q3 2014. Prices actually went up by 6.44%, when
adjusted to inflation; - terraced houses rose by
5.89% (5.18% inflation-adjusted) y-o-y in Q3 2014; - maisonettes, on the other
hand, had a slight price drop of 0.42% (-1.09% inflation-adjusted) y-o-y in Q3
2014; - other properties consisting
of townhouses, houses of character and villas, experienced the highest price
increase of 16.17% (15.38% inflation-adjusted) during the year to Q3 2014.[2]
2. The
Process
Purchasing property in Malta is a process that is marked
with certainty. Any transfer or change of title in relation to immovable
property, being a title emanating from a real right, must be undertaken through
a public deed, which is a contract signed in the presence of a notary public,
and registered in the Public Registry. Searches for the verification of title
are also undertaken therein and lease hold titles and usufructs
are also registered in a similar manner.
Practice is such that, searches in the title of the property
are undertaken before the actual transfer of ownership is done, thus ensuring
that the seller is entitled to sell and that there are no encumbrances or
claims on the property. These searches are usually undertaken and vetted by the
notary and the legal representatives of the purchaser. On the searches being
undertaken, a purchaser may choose to obtain a title report from the notary
guaranteeing title for five years. The guarantee is not given by the State, but
by the notary himself who carries the status of a public officer in Malta.
In addition to the above, the Malta Civil Code provides for
the implied warranty of peaceful possession afforded by the seller to the purchaser. It is custom that in the final deed of sale, whilst
warranting peaceful possession and good title to the property, the seller, by
way of guarantee of such, constitutes a general hypothec on his/her property
present and future, in favour of the purchaser.
The process comprising searches, root of title guarantees,
registration and enrolment in a public registry, grant any local and foreign
buyer a level of certainty and transparency that is obviously paramount when
investing in real estate on the island.
Specially
Designated Areas
We would like to
end by placing particular focus on Malta’s Special
Designated Areas (SDAs). These are prime residency areas where the
conditions of acquisition are the same for Maltese and foreign residents, with
the intention of providing top-end facilities and amenities to buyers within
the same location.SDAs provide an exception to the rules on residency permits
in Malta, in that non-Maltese purchasers may buy property with the same rights
as Maltese citizens, thus not requiring a special permit from the Maltese
government. Essentially this means that purchasers, whatever their nationality,
are exempt from the requirement of obtaining an Acquisition
of Immovable Property (AIP) permit. Once such property is acquired, it may
be leased out without any restrictions. This has obviously resulted in a very
effective and profitable product for foreigners who want to invest, speculate
and lease out a diverse property portfolio without suffering any restrictions that
would normally be imposed on property located out of the SDAs.
Malta is a
pro-investment and pro-business jurisdiction. All stakeholders, including banks
and various administrations, have all sought to provide solutions and products
that encourage and attract FDI into the country. The success of the property
market is evidence of this approach. The country seeks to reach a balance
between ensuring propriety whilst at the same time cutting down on bureaucracy
and red-tape. Yet this is done without forfeiting important elements such as financial
reputability, proper due diligence on investors, soundness of borrowers, certainty
of root of title and more. A mix of all the above elements has resulted in a
relatively affordable andbuoyant property market.
All this, coupled
to the other advantages the island can offer the new expat, including a vibrant
network, safe environment and now even the possibility of Maltese citizenship,
have labelled the island as the best, current European personal living
solution.
This article is
intended to be of a general nature and is not intended to address the specific
circumstances
Co-founding
partner, Maria is the partner in charge of the Corporate law & Regulated
Business Units of the Firm.
On a
day to day basis, Maria’s team advises an array of clients on regulatory
issues, compliance matters, commercial and finance transactions and corporate
governance issues in general. Maria has vast experience of start-ups, corporate
restructurings, takeovers, mergers, privatisations, and equity and debt
financing structures. Maria’s team regularly handholds banks and financial services
companies on the procedure to set up in Malta, the compliance and regulatory
aspects of their business including client intake and due diligence, ongoing
compliance procedures, reporting and general regulatory observance matters.
Maria’s
pet subject centres around the application of traditional notions of Intellectual
Property Financial Services Law to the online world, as well as the
conversion of brick and mortar notions to cyberspace. These mostly include
projects with a fusion of technology law and investment/finance law, such as
payment gateways, gaming operations, e-money institutions and ICT online
operators.
For more information about investing in Malta and property
in Malta, please read:
Investing
in Malta – Why Malta
Who
can buy property in Malta?
[1]Figures
released by the Central Bank of Malta (CBM)
[2]House Prices in Malta continue to Rise, Global
Property Guide, 23 January 2015.