MAGAZINE 44 SPOTLIGHT

A slow pace of life, island lifestyle, warm all year-round climate, and low crime rate, Malta has a lot to offer anyone looking for a holiday- or second-home in the Mediterranean and the good news is, it's also a sure-fire investment opportunity.

Linked to Tunisia, Sicily and mainland Italy by ferry, Malta is composed of two main islands and several smaller islands. It is home to about 404,000 people with an estimated Gross Domestic Product (GDP) per capita for 2006 of US$16,000. Valleta, the capital, is located on the biggest island (also called Malta). Gozo is the second major island.

A proven tourist destination, particularly with European holidaymakers, Malta now benefits from a no-frills airline route (Ryan Air), which has greatly increased both its accessibility and affordability. The volume of visitors to the island has risen over the past year, and demand for rentals is up because tourists are now looking at long weekend stays as well as full-scale vacations.

Over the past 15 years, property prices in Malta have risen by around 400 percent. The surge has been gradual, resulting from steady GDP growth, and it looks set to continue since Malta is adopting the Euro this month.

In the past, the price of property has risen dramatically in many countries (including Italy, Ireland and Spain) with the introduction of the Euro. Prices of properties in nearby Sicily, for example, have risen on average about 20 percent over the past four years.

In 2004, property prices rose 16.91 percent because of Malta's May 2004 accession to the European Union (EU) and the Investment Registration Scheme (September 2001 to June 2005), which effectively made the islands a tax amnesty for residents who had invested overseas. Prices in the Maltese property market are still rising and rising well.

Demand for property in Malta is plentiful despite a housing boom kick-started towards the end of last year and prices are set to rise between 8 percent and 10 percent this year.

Due to increasing demand for apartments and villas, the Maltese government is likely to allow developers to use even more land for building this year. This may mean the island becomes even less spacious (it is currently the third most populous in the world) but investors are expected to continue to snap up properties.

The bottom line is that you can get much more for your money by investing in Malta. For a home in excellent condition, with good facilities, that has been refurbished or redecorated within the last five years, you can expect to pay HK$22,595 per square metre. The average price for properties in Valetta is HK$19,528 per square metre, while the average price in Gozo is HK$14,822.

Roundtrip transaction costs are low to moderate, ranging from 6.5 percent to 13.5 percent of the property value.

It's worth noting that foreign nationals and EU citizens can only buy one property in Malta and Gozo. But the red tape is easy to get around since you can buy more properties in specially designated (Maltese) areas, such as Tigné Point, Portomaso, Cottonera and Manoel Island.

The official line is that non-residents can only sell their properties in Malta to Maltese citizens. But in actuality you can sell to other foreign nationals (and EU citizens) if you cannot find a Maltese buyer.

Due to the temperate climate, properties can be rented out year round, with yields averaging at around 7 percent. Another plus is that the Maltese rental market is pro-landlord — rents and rent increases can be freely negotiated, except for rental agreements entered before June 1, 1995.

Properties owned by foreigners can be rented out only if they are valued over HK$2.7 million, have a swimming pool, and are registered with the Hotel and Catering Establishments Board. Foreign-owned properties can only be rented out for short-term lease agreements. But of course you can look at this as a plus: stick to fortnightly rentals and you can stay in your property yourself whenever you choose.

• Rental Income: Net rental income is taxed at between 20 percent and 35 percent

• Capital Gains: Capital gains are generally taxed at a flat rate of 12 percent,
  levied on the transfer value or the selling price

• Inheritance: There are no inheritance taxes in Malta, but there is a transfer duty
  payable by the heir at 5 percent of the declared property value

• Residents: Maltese citizens are taxed on their worldwide income. Resident
  foreigners are liable to tax only on their income sourced in Malta