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Feature,

Property: Malta

Our property editor Shane McGinley gives you the lowdown on the island of Malta

Property: Malta

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Maltese order
A holiday hot spot in the Med and a growing financial services hub, there’s more to Malta than meets the eye.

Known to have been inhabited since about 5000BC, Malta’s strategic location in the Mediterranean has always made it an attractive asset for invaders. Everyone from the Romans, through to Arabs, Normans, Napoleon and finally the British have ruled Malta, before it became a Republic in 1964. This diverse mix of cultures and influences is evident in the island’s architecture and population, and today the “invaders” come in the shape of tourists and property buyers.

Geoffrey Ciantar of Coldwell Banker Malta says: “Malta has been a popular property destination for some 20 years. The Maltese hospitality is unequalled, and it’s a very safe place to live. There are also tax incentives for non-domiciles who relocate here, with income tax at a flat rate of 15%.

“Because of the small size of the island and the 95% home-ownership rate, land has always been Malta’s most valuable asset. Coupled with restrictions on building, limitations on the number of properties foreigners can buy, rising demand since Malta joined the EU and budget airlines now flying in on a daily basis, demand for holiday property is set to increase further.”

However, Ciantar notes that there is an oversupply of low-end apartments in the €100,000– €180,000 price bracket and for the first time in 20 years, property growth rates in this sector have dropped, making this very much a buyers’ market. Figures from the Global Property Guide confirm this. Around 2004, when Malta joined the EU, prices shot up by about 20%, then in 2005 growth dropped back to 9.8%. In 2007, the overall house price index grew by only 1%, and last year was in decline, especially in the vulnerable low-end apartment sector.

There are several reasons for the boom, including low interest rates, varied mortgage opportunities and an increase in the number of units, which also fuelled the correction. In the early 2000s, some 1,300 permits were being given the green light each year, yet by 2007 this had risen to 11,000. The difference with Malta though is the relative scarcity of land and its population density, which is growing all the time. The latest population estimate was 403,532 and density is 1,282 per km2 – one of the highest in the world. But at the high end of the market “demand for larger and higher-quality property still exceeds supply”, says Ciantar.

Vanessa Lupi of Frank Salt Real Estate says: “The introduction of the euro in January 2008 has led to increased liquidity in the market and increased buyer confidence to invest in property. Considerable foreign investment is earmarked for the next three years, so prices are likely to increase over the next couple.”

Government figures show the country’s deficit has risen from €96.4 million in 2007 to €258.3 million for the first nine months of 2008. But GDP for the second quarter of 2008 rose 6.2% and unemployment has fallen by 8%.

Parker Green International, a large Irish developer, recently appointed an International Advisory Board, including former Irish Taoiseach Bertie Ahern, members of the UK’s House of Lords and a Harvard University professor. A sign of Malta’s attractiveness was the fact that it hosted the board’s first meeting and is considered one of the top priorities for potential investment. Company chairman Dr Gerard O’Hare says: “We wanted to choose a host country that clearly represents internationalism. Malta seemed the ideal location, and the country has such a strong business and trade reputation too.”

The property industry represents about 12.5% of GDP and about 7% of employment. In a report for the Malta Chamber of Commerce and Enterprise, local economist Dr Gordon Cordina says that if some of the vacant holiday properties are sold to foreign investors over the next 15 years it could raise about €250 million a year in extra revenue.

“Such inflows would have important positive multiplier effects in the Maltese economy, affecting not least government revenue,” he says. “The current financial crisis opens up immense opportunities for the real estate sector, as it makes property in Malta a better and sounder investment, both for locals and foreigners. In the meantime, the correctivity process for the market is under way and Government needs to ensure it keeps supporting and facilitating the property market through the appropriate fiscal and regulatory policies.”

In terms of where to invest, Valletta’s waterfront, Sliema’s Tigné Point, Gzira’s Metropolis Plaza, St Julian’s Pender Place and Kalkara’s Smart City are the main developments. Portomaso in St Julian’s was the first large-scale upmarket residential development. While recent figures from Malta’s National Statistics Office show that in July 2008 cruise-passenger traffic was up 23% and tourism was up 5.2%, the government is keen to move away from a dependency on the tourism industry. An example of this would be the plans for Smart City, one of the first of its kind in Europe. One of Malta’s biggest-ever developments, it will be modelled on Dubai Internet City and Dubai Media City, and is scheduled for completion in 2021.

Ciantar says: “Financial services generate 12% of GDP, and this is expected to double over the next decade. Online betting firms and back-office operations are also a growing market. As the number of expatriates coming to Malta to work increases, so does demand for residential and office accommodation.”
FOR ANYONE LOOKING TO INVEST, VISIT THE ISLAND AND THE MALTA PROPERTY EXPO, FROM 27 FEBRUARY–1 MARCH, WWW.MALTAPROPERTYEXPO.COM

FACTS & FIGURES

AREA: 316km²
POPULATION: 403,532
CURRENCY: Euro
HOUSE PRICES: Prices have stalled of late, and apartments are down 2.9%, duplexes by 1.3% and terraced houses have risen just 2%.
RENTAL YIELDS: The average monthly rent for a two-bed furnished flat in Marsascala is €250; a three-bed maisonette in Attard is €500; and villas start at €2,000–€3,000. Sliema and St Julian’s are the best rental areas.
AGENTS: Go through agents vetted by the Federation of Estate Agents of Malta and Gozo (www.feamalta.org), AIPP (www.aipp.org.uk), or FOPDAC (www.fopdac.com).
BUYING TIPS: Non-Maltese can only purchase one property, unless within designated developments where there are no restrictions. Foreigners must apply for an Acquisition of Immovable Property Permit. If buyers want to rent out the property, it must be valued over €233,000, have a pool and be registered with the Hotel and Catering Establishments Board.
RESALES: Foreign owners must first look for a Maltese (or even EU) buyer. Only if none is available can they sell to non-Maltese. TAXES: Rental income is taxed at rates ranging from 17.8%–26.7%, capital gains tax is 12% and there is no property tax.
AVERAGE PRICES: Apartments at Portomaso start from €232,930 for a studio. In other “special designated areas”, such as Tas- Sellum, prices range from €175,000, while in the north of the island buyers have opted more for properties in the €90,000– €150,000 price bracket.

Take Five
MALTESE MARVELS


Santa Maria Estate, Mellieha
PRICE: €1,970,000
DETAILS: A fully furnished, four-bedroom detached bungalow with large living spaces, terraces, a large pool, gardens and a garage.
CONTACT ANDREW GATT, TEL: +356 2730 2730, WWW.COLDWELLBANKERMALTA.COM

Farmhouse Gozo, Munxar
PRICE: €542,744
DETAILS: Farmhouse built on a picturesque ledge on the outskirts of Munxar village. Recently restored, it boasts a traditional courtyard, three bedrooms, a pool and a terrace.
TEL: +356 2138 3970, WWW.PROPERTYLINEMALTA.COM

Tigné Point
Price: From €407,000
Details: Stylish waterfront homes, many with harbour views of Valletta. There are sports and pool facilities, and the development is car free thanks to underground parking.
TEL: +356 2065 5510, WWW.TIGNEPOINT.COM

Pendergardens, St Julian’s
PRICE: From €86,000
DETAILS: This development in a popular resort near Valletta will comprise nine low-rises and two towers. Phase One has a range of two- and three-bedroom flats still available.
TEL: +356 2138 3260, WWW.PENDERGARDENS.COM

Farmhouse Sannat
PRICE: €373,000 DETAILS: This beautifully converted, threebedroom farmhouse is fully furnished, and includes many traditional features, a large courtyard with two wells and a large pool.
TEL: +356 2138 3970, WWW.PROPERTYLINEMALTA.COM

Been there done that

MOVING TO THE MALTESE SUN
A career in real estate finally brought one couple to their dream destination.
SWEDISH-BORN NIC ASHBY IS NO stranger to moving from one country to another. In 1993, his first move took him to the Isle of Man, where he worked in the life assurance industry and also met his wife Lorna. She shared his love of travelling and over the years their favourite destination quickly became Malta.

Lorna says: “My father was originally from Malta, which is one reason why I have always been attracted to the island. But there are so many other reasons why we kept coming here. The Mediterranean climate is wonderful when you come from northern Europe, but more than anything, it is the open and warm welcome you receive from the Maltese people that make it such a wonderful place to live.”

They started talking about making a permanent move to warmer climes three years ago when the winter showers were at their worst at home. Malta was high on the agenda, but Nic had just started a career in real estate and this took them to countries like Morocco, Portugal and Spain, before they ended up moving to Malta permanently.

“It was great to experience the other countries and their cultures for a while, but we never really put down any roots,” says Nic. When they were on holiday in Malta in August 2007, they started their property search in earnest. They found their dream home within a couple of days, a 300-year-old house filled with character.

The decision to buy was made that same evening over a glass of wine in one of the local restaurants. Nic says they had expert help all the way, and the buying process was easy. They also found the system to be very secure. The pair moved over properly last September, ready to oversee the renovation of their house in Cospicua. They now both have jobs in the real estate industry and hope to move into their new place by the spring.

Tips & debate

PROPERTY AT A FRACTION OF THE COST
For those who would like to dip their toe into the world of luxury property but are worried by the present economic conditions, a new approach is on offer.

THE NEWS IS SO FULL OF STORIES about the decline of property markets across the world and the “credit crunch” that you’d think buying property anywhere had almost come to a halt. That’s not quite true, it’s just more difficult, and with less money about people are also more cautious about buying second homes. One alternative for those wanting a home in the sun, but worried about costs and a possible decline in rental options, is to consider a fractional-ownership scheme.

Also known as “shared ownership” and “residence clubs”, fractional ownership is big business and a quickly growing sector of the luxury property market. It’s extremely popular in the US, but less well-known in western Europe – at least according to DCP International, the company that pioneered the residence club concept in Utah, US. It reports that the concept has grown into a $2.1 billion (€1.63 billion) industry. The company has residence clubs in some of the world’s most exclusive destinations, from Cabo San Lucas and Aspen, to Manhattan and Florence.

DCP International CEO Europe Peter Kempf is keen to point out how the concept differs from timeshare schemes. “Unlike timeshare, residence club owners own in perpetuity and their ownership can be sold or willed like any other form of real estate,” he says. “The concept has taken a strong hold on the market in London, and there is a much greater awareness of the difference between timeshare and fractional ownership.”

There are various models of fractional ownership being used, but in essence, instead of buying a luxury property outright a buyer will purchase maybe a quarter or a tenth of the property. In return, they can use the property for a set period of time each year and can resell it, hopefully making a profit if prices have gone up. It offers better flexibility than a timeshare, and buyers are investing in a slice of luxury property.

“We are seeing a lot of hotel operators entering the industry and almost all new developments incorporate a fractional or private residents’ club element into the offering,” says Kempf. The typical buyer is usually aged 40–60 years old and is a high net worth individual. They have the ability to spend a million or three on a second home, but can’t justify it as they won’t be able to maintain or use it enough.

“Surveys have shown that the majority of second-home owners only use their properties for about eight weeks a year, which sometimes makes it difficult to justify the investment of an outright property,” says Ewa Petersson, sales director at Parque da Floresta Golf & Leisure Resort in Portugal. “We developed fractional freehold options to meet the wishes of those who would love to buy their dream home abroad but feel more comfortable with a lower capital outlay. Fractional ownership also gives cautious buyers the option to test ownership abroad, especially in the current market.”

This can be seen in the price breakdown. A Golf Village House in Parque da Floresta Golf & Leisure Resort costs €505,000 outright, while a quarter share would be €146,000. Fractional owners also split the running costs and rental profit, as well as any potential capital appreciation if the property is sold. A quarter share in a Golf Villa, costing about €1,075,000 outright, costs €325,000.

But it’s not just villas in far-flung climes on offer in these schemes. There are quite a few properties up for sale in London, and they’re being snapped up quickly. One such development is 47 Park Street. It offers “fractional membership” of a one- or twobedroom residence with all the comforts of a world-class five-star hotel for at least 21 nights a year until 2050. Buyers also get a range of extras, from premium access to the Royal Opera House to golf and spa benefits.
FOR MORE DETAILS, VISIT WWW.DESTINATIONCLUB.COM, WWW.47PARKSTREET.COM AND WWW.FRACTIONDIRECT.COM SHANE MCGINLEY IS OVERSEAS PROPERTY CORRESPONDENT FOR THE SUNDAY TRIBUNE.

15 January 09