2021 Budget: What are the Highlights for Malta’s Real Estate Market?

  • 12.November 2020
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New and improved incentives promise to reinvigorate the local property sector.

As always, the 2021 Budget focuses partly upon Malta’s real estate market. It introduces, modifies and extends incentives and schemes that will benefit both property buyers and sellers.

This year, however, the effects of the ongoing COVID-19 pandemic are being felt by every industry across the world – including Malta’s real estate sector. The newly announced measures included in the 2021 Budget promise to have a substantial impact on Malta’s real estate market, to boost confidence in property investment during this challenging time and propel the sector into the new year.

Here are the 2021 Budget’s main highlights for Malta’s real estate sector:

First-time buyers’ tax scheme improved

The existing scheme encourages first-time buyers to take their first step on the local property ladder. Now, the 2021 Budget is extending and improving it so that buyers can enjoy even better tax rates when purchasing their first property.

While the property value eligible for a reduced tax rate was previously applicable to just the first €175,000 through the scheme, the Budget has upped this amount to €200,000 for first-time buyers. In fact, this is the second time in as many years that the Budget has improved on this incentive, with the original limit having been set at €150,000.

The new money-saving incentive should encourage a surge of first-time buyers to take the leap to get their hands on property now, rather than hesitate and potentially lose out. The idea is that it will boost the local property market over the next year.

Reduced income tax and extended stamp duty scheme

Meanwhile, another highlight of the 2021 Budget is the extension and improvement of a noteworthy property incentive scheme – applicable to anyone purchasing a property and not just first-time buyers.

Through the scheme, any property purchases in Malta and Gozo that have a promise-of-sale agreement registered by 31 March 2021 and the contract signed by 31 December 2021 will enjoy considerable savings in terms of income tax and stamp duty. For the first €400,000, the income tax rate is set via the scheme at 5 per cent, while the stamp duty rate is set at 1.5 per cent.

Beyond merely extending the existing scheme into 2021, the Budget makes another important improvement: it is upping the capped amount for the reduced rates to €400,000 from €150,000. This change will potentially signal huge savings for property investors across the Maltese Islands and open up the market even further for first-time buyers in particular.

Better tax rates on property donation and inheritance

The Budget is also offering a reduced tax rate on property given by donation. What’s more, a rate of 3.5 per cent has also been made applicable to the inheritance of residential property.

Any property donated by parents to their children – who will then use it as their residence – will be duty-free on the first €250,000. This is an improvement on the previous capped amount of €200,000. Any value over and above the €250,000 limit will then be subject to duty at a rate of 3.5 per cent.

Meanwhile, the property transfer tax concession of 1.5 per cent that has featured for the past three years will also be extended by a further year.

These new tax incentives promise to catalyse greater movement in the market into the new year. Families are expected to transfer property so as to take advantage of financial savings in the wake of the COVID-19 pandemic.

Boosted foreign investment through tourism

Another consequence of the pandemic has been its impact on the island’s tourism sector. Many countries have gone into lockdown, and global travel has been radically reduced. By extension, this has impacted levels of foreign investment in the local property market because potential investors have not been able to experience the island’s many lifestyle benefits first-hand.

An upcoming Tourism Regeneration Strategy, which was announced as part of the 2021 Budget, may therefore fuel greater foreign investment within Malta’s real estate market through a boosted tourism sector.

Nevertheless, the 2021 Budget gives its greatest support to local buyers, who still make up the largest percentage of homeowners across the country.

At first glance, the 2021 Budget does not appear too different from the published Budgets of previous years. However, it sets itself apart in one crucial way: by offering timely attractive incentive schemes – just when local people may be asking themselves whether or not the time is right to buy a property. Bearing in mind the financial advantages of buying now over buying later as presented by the 2021 Budget, the answer to that question could well be a resounding ‘yes’.

Speak to a member of the RE/MAX Malta team today about how you can take advantage of the property incentives included in the 2021 Budget.

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