Malta guards its land jealously, but returns can be good for successful...

Malta guards its land jealously, but returns can be good for successful foreign buyers | Библиотека | Мальта для всех!

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Faith Glasgow

When Simon Barnes and his family decided to improve their quality of life by moving to Malta from London a couple of years ago, their plan was to rent out their former home in the Barbican, central London. But they soon realised their capital would work harder for them if they invested it in the Maltese property market.

«We sold the Barbican flat and bought a second apartment in the Portomaso development where we’re now based, for about half the price,» says Barnes. «It took four or five months to get the place ready – for example, the furniture we ordered took three months to come – but we had a queue of people wanting to view it, and within a week a business tenant moved in on a two-year lease.»

The new arrangement makes a lot of financial sense. First, the Portomaso apartment is achieving rent of about Pounds 2,000 a month, which Barnes estimates is roughly in line with what the

Barbican property would have generated. But running costs are a fraction of London’s, and service charges amount to about Pounds 500 a year, compared with the Pounds 6,000 or so they were paying in the Barbican. Service charges also cover use of facilities at the Hilton hotel within the complex.

So why is Malta such an attractive proposition for investment purchases these days? In part, it is to do with the strength of the rental market. Malta is a popular tourist destination, for Britons and Italians in particular, though most are older people or families rather than clubbers; many retired people spend the winter there.

But the island also has a well-established business community and multinationals such as Vodafone and Microsoft are investing and expanding there. Foreign business interest is likely to increase, moreover, on the back of Malta’s entry into the European Union next May. That, in turn, will further boost rental demand, both from the existing corporate tenant market and from unsponsored workers from other EU countries.

«When we bought the investment apartment in Portomaso, we originally thought we would aim for the holiday rental market,» says Barnes, «but in fact we soon found that there’s a much bigger demand from expatriates on two-year contracts with international companies. There’s a huge shortage of suitable properties for business people and other new arrivals to rent.»

Rental demand is underpinned by a sales market that has always been steady but is now experiencing additional uplift. Grahame Salt, of Maltese estate agent Frank Salt, estimates, that prices tend to rise on average by 8 per cent a year, although at present that is nearer 10-15 per cent. He expects that level of growth to continue for the next few years. «The local market is healthy, with the bulk of sales to locals; being an island, land is limited, so property prices rise as a matter of course,» he says. «But it’s particularly buoyant at present. Foreign interest is on the increase, because of Malta’s imminent EU membership. Furthermore, the government recently launched a scheme to encourage Maltese holding funds abroad to bring them back, and most people have favoured putting them into property.»

The easiest properties to rent out, according to Salt, are apartments with a sea view, particularly in Sliema or St Julians (costing upwards of Pounds 140,000 for a three-bedroom unit), and old «houses of character» with pools (from Pounds 180,000), which are concentrated in the villages and on the neighbouring island of Gozo.

But foreign buyers cannot simply pile in and snap up Malta’s limited property stock, as John Huber, senior tax manager at KPMG in Malta, explains. There are minimal values for an apartment and for a house, and foreigners may only buy one property except in designated areas. Because of its size and population density, Malta has been granted exemption from the general EU rule of unrestricted property purchase.

There are three designated areas in Malta itself, at different stages of completion, and one in Gozo which is not yet on the market. Property within them is built to high specifications and is markedly more expensive than elsewhere on the island. Salt points out, however, that there are several advantages for foreign investors.

As well as being able to buy any number of units, foreigners can buy through a trust or company. Rentals, too, are free of the restrictions imposed on properties outside designated areas. Crucially, says Salt, demand is very high for both purchases and rentals. «Not only are rents higher but we can generally find long-term tenants within a week. Properties are typically achieving yields of 5-6 per cent gross, but the important thing is the level of capital appreciation we’re seeing, at 15 per cent a year plus.»

Portomaso in St Julians, which includes a Hilton hotel, a marina and the Portomaso Business Tower as well as 300 apartments, is largely occupied. It’s an upmarket development, with prices to match, ranging from a one-bedroom flat without a sea view at Pounds 140,000, up to large three-bedroom apartments at around Pounds 410,000.

Foreign investor Simon Barnes likes the fact that residents have use of the Hilton facilities. «It’s a great package to be able to offer tenants.» Cottonera is built on the historical waterfront at Vittoriosa. It, too is a new-build development (with plans for a hotel, marina and casino), but against the backdrop of Fort St Angelo, with views over the Grand Harbour to Valletta. Apartments there are smaller and cheaper: three-bedroom units cost from Pounds 160,000 to Pounds 280,000. Construction has further to go at south-facing Tigne Point, between Sliema and Valletta. About 450 units are scheduled in total and most of the first phase has been sold. Prices here for large three-bedroom units with sea views are around Pounds 520,000, says estate agent Grahame Salt.

Portomaso in St Julians, which includes a Hilton hotel, a marina and the Portomaso Business Tower as well as 300 apartments, is largely occupied. It’s an upmarket development, with prices to match, ranging from a one-bedroom flat without a sea view at Pounds 140,000, up to large three-bedroom apartments at around Pounds 410,000.

Foreign investor Simon Barnes likes the fact that residents have use of the Hilton facilities. «It’s a great package to be able to offer tenants.» Cottonera is built on the historical waterfront at Vittoriosa. It, too is a new-build development (with plans for a hotel, marina and casino), but against the backdrop of Fort St Angelo, with views over the Grand Harbour to Valletta. Apartments there are smaller and cheaper: three-bedroom units cost from Pounds 160,000 to Pounds 280,000. Construction has further to go at south-facing Tigne Point, between Sliema and Valletta. About 450 units are scheduled in total and most of the first phase has been sold. Prices here for large three-bedroom units with sea views are around Pounds 520,000, says estate agent Grahame Salt.

Financial Times (London,England) November 15, 2003

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