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Investing in a second home in Malta

Malta on the rise
Did you know that Malta’s economic growth is the highest in the EU after Ireland’s? In 2014, the GDP increased by 3.5% and it is expected to increase by 3.6% 2015 and by 3.2% for 2016. Furthermore, Malta boasts one of Europe’s lowest unemployment rates (3.4% March 2015) and inflation (0.8% in 2014).

What does this growth mean and how stable is it?
For years, tourism has been one of the main sources of income for Malta. After the declaration of independency in 1964, it were mostly the British who considered the former English colony as favourite holiday destination. The warm climate, the history, the culture, the hospitality and the English language convince the people to return. In the last decennia, the popularity of Malta has also infected other Europeans and the number of tourists keeps increasing year by year.
However, the welfare state of Malta, that has been an EU member state since 2004, does not rely on tourism only. For a more diversified economy, the Maltese government gradually invested in key sectors, such as the financial market, IT, aviation and foreign investments. Thanks to stable politics, a favourable business climate and a modern infrastructure, today the service sector covers 75% of the Maltese economy.

Growth housing market
Malta’s economic development can also be noticed in the housing market. In the fourth quarter of 2014, a price increase of 11% was measured. Within the framework of the modern welfare state, the Maltese, who rule the market in number themselves, purchase real estate more often and at a younger age than before. The share of foreigners who purchase real estate on Malta increases as well. For foreigners especially the luxury complexes carrying the status “Special Designated Areas” are popular, since these are the only apartments that may be rented out freely by foreigners who have lived on the island for less than 5 years. With only 15% of rental revenue income tax on Malta, a net rental yield of 6 to 7% is the standard. Due to the increasing house and rental prices, Maltese real estate is a good investment and a second home usually offers a high yield.

What does Malta’s future look like?
Malta is in development and many foreign companies and investors see a future for this island. An interesting indicator is the number of foreign companies that move to Malta. In 2011 there were 57 and in 2013 this number has increased up to 111 in a country with 421,000 inhabitants. Malta has become a home for the highly educated who want to pursue a career in the growing financial sector or the online gaming industry, entrepreneurs who establish their internet companies, young people who want to learn English, etc. They all enjoy the well-functioning welfare state with a wonderful climate and a culture with a rich history. At the same time, Malta maintains its restrictive measures in order to prevent a tragedy as was the case with Cyprus. For this reason, foreigners cannot purchase more than one piece of real estate (with the exception of 12 luxury projects with the “Special Designated Area” status) to prevent speculation on the housing market.

In order to give stability to the economy in the long run, there are excellent arrangements for the banking sector and the financial sector. The World Economic Forum has declared the Maltese banking sector as the 10th healthiest in the world. Malta finds itself without doubt in an economic acceleration, the figures don’t lie. However, Malta stays Maltese with all its standards and values. The traditions remain intact and historical places are restored. The locals are part of the wealth and foreigners are invited to be a part of the Maltese society.