Malta's Mortgage Market in 2012, a rare case of "business as usual"

Lying to the south of Italy, Malta is considered a jewel in the Mediterranean. Malta's economy is highly tourism based and its touristic property market has suffered along with many of its southern European neighbours.

Malta remains a popular tourist destination, with 1.2 million tourists every year. Three times more tourists visit than there are residents. Tourism infrastructure has increased dramatically over the years and a number of good-quality hotels are present on the island, although overdevelopment and the destruction of traditional housing are of growing concern.

Some interesting parallels exist when we compare the housing market to other Mediterranean countries, such as Spain, Italy and Greece. The most notable general characteristic over the last few years is that island markets do not seem to have suffered such severe depression as their mainland counterparts.

In the case of Malta prices have been remarkably solid when compared to mainland rivals with falls of 2.7% in 2008, 5% in 2009 and even a slight rise of 1.1% in 2010, this compares very favourably when you look at Southern Italy and Spain.

The continued availability of finance for tourist property remains more favourable than on the mainland. In countries such as Spain and Italy lending terms have become highly restrictive with many banks pulling out of financing altogether.

Malta has far fewer banks, due to its size. Historically the two main lenders for foreigners have been HSBC and Bank of Valetta. Both of these banks remain in the market at this time and their lending terms remain very favourable for those investing on the island.

Investors can still obtain 80% mortgages for holiday homes, 90% for new main residences and 75% for buy to let investments. Variable rates start from 3.5% with fixed rates in the range of 3.2%-5.0%.

These mortgage products are among the best available anywhere in Europe and are a reflection of the underlying economic strength (or lack of weakness) in the Maltese economy.

There are specific requirements for non-nationals buying property on Malta, with legislation designed to protect the local market and perhaps encourage "the right type" of investor.

The purchase of residential property in Malta by non-residents is regulated by legislation and normally non-residents are allowed to own only one residential property in Malta.

In order to be able to purchase property in Malta, non-residents need to apply for an Acquisition of Immovable Property (AIP) permit from the Ministry of Finance. There is no upper limit on the amount non-residents can spend to acquire property in Malta, however there are minimum limits depending on the type of property being purchased. For legal purposes, non-residents are defined as non-EU nationals, or EU nationals who have not resided in Malta for a continuous period of five years. However, persons falling in the latter category who intend to purchase property in Malta to be used as their primary residence, are exempt from the above restrictions and do not have to apply for the AIP permit.

Purchase of property situated in defined zones referred to as special designated areas is also exempt from any restrictions. Non-residents may therefore own more than one property in these areas, and the purchase would not be subject to issue of the AIP permit.

In September 2011 the government issued provisions for special tax status for non-residents meeting certain conditions, these rules are targeted at high net worth individuals and are likely to lead to increased inward investment from that segment of the European population. It is important to apply for the permit before making any financial commitment on an investment and it is always advisable to take proper legal advice in advance of a purchase.

Similarly getting mortgage advice in advance helps you know what loan you will be able to get and the prices you can look at.