Issue link: https://maltatoday.uberflip.com/i/1405706
Property in Malta AN OVERVIEW 10 29 AUGUST 2021 D emand for property is rising again. The number of residential transactions rose by 8.7% y-o-y in Q1 2021 to 3,2123 units, after falling by 21.2% in 2020, according to the National Statistics Office (NSO). Likewise, the value of transactions rose strongly, by 15.2% y-o-y. is can be part- ly attributed to the government's tempo- rary COVID-19 measures providing for a reduced tax and duty rate of 5% and 1.5%, respectively, on the first €400,000 (US$483,308) of property transferred in- ter vivos. ese temporary measure came into force in June 2020 and will end on July 2021. Malta's economy is projected to grow by 4.5% this year and by another 5.4% in 2022, after a sharp contraction of 9% last year, according to the European Commission. A brief history of Malta's housing boom Malta's property market enjoyed strong growth from 2000 to 2007, with the house price index rising 78.9% (53.4% in- flation-adjusted). Malta's housing boom peaked in the second quarter of Q2 2004 with an amazing 36.73% y-o-y house price rise. e boom was set off by low interest rates, which had an extraordinarily strong effect, boosting residential mortgage debt from only 19.6% of GDP in 2002, to 34.6% of GDP in 2006 (it now stands at 45.8% of GDP). A supporting factor was the Investment Registration Scheme, a tax amnesty for Maltese residents with overseas assets, ef- fective from 2001 to 2005. en, like other European countries, Malta was hit by the global financial crisis of 2008. Dependent on foreign trade and tourism, Malta's economy contracted by 1.1% in 2009 – the first decline since 2001, and from 2008 to 2010, house prices fell by 8.8% (-15.2% inflation-adjusted). After a short-lived recovery in 2011, house prices fell again by 2.2% (-5.2% inflation-adjust- ed) in 2012. House prices then recovered strongly in 2013, mainly due to government's launch of new property-related measures, par- ticularly the Malta Individual Investor Programme (MIIP). House prices have ris- en continuously since then. Malta's buoyant house price rises over the last eight years has been supported by: • strong economic growth, averaging 6.5% annually from 2013 to 2019; • the introduction of the MIIP in 2013, targeting high net worth individuals; • a low-interest rate environment; • buoyant disposable income; and • a rising number of foreign workers in the country. Prices were also boosted by the exemp- tion of first-time property buyers from a 3.5% stamp duty on the first €150,000 of a new property's value. In 2018, second-time buyers became eligible for a stamp duty refund of up to €3,000 on replacing their current residential homes, but not if they own any other property, or are upgrading to a luxury villa. Homeowners with dis- abilities can avail of a higher stamp duty refund of up to €5,000.