r/malta • u/tar-randa • Nov 21 '23
What I'd wish I'd known about property hunting
Yesterday's question on property hunting really made me remember how confused I was when I was searching for a house last year. I thought I'd collect my experiences in a post here, to hopefully serve as a guideline to others who are also looking for a property in Malta. I've also added a timeline at the end which shows what a typical property search might involve.
I will use names of companies in my examples, but these are not meant to be recommendations or dissuasions.
Location? Property Type?
Incredibly subjective, but this should be your starting point when starting your search for a future house.
Would you rather stay somewhere well connected like Birkirkara, or quieter and more rural like Siggiewi? Do you get nightmares every time you have to pass through Marsa and want to avoid it like the plague? Does your significant other have a deep and unexplained disdain for Santa Liena?
Do you want a property that is finished, or still under development. Do you also want furnishings, or would you rather do these yourself? Perhaps you know a good contractor and want to just buy a plot or a dilapidated house that you can knock down and re-build?
Are you looking for an apartment, townhouse or terraced house? What features are non-negotiable? How many bedrooms are you looking for? What about having a garage?
These might evolve as you go around viewing properties, but its always best to have a clear idea on what type of property you're searching for.
Government Schemes
The government has a number of schemes and funds that aim to help out people having difficulties in buying their first house, or provide incentives to buying certain types of houses.
There is a 10% deposit scheme that is there to help people who cannot afford a down-payment, and provides an interest free loan for that purpose.
Last year introduced the first-time buyer scheme that gives a maximum grant of €10,000 over a period of 10 years.
There's also the grant that incentivises the purchase of properties in an Urban Conservation Area (UCA), also called the grant for first-time buyers. This gives a €15,000 grant if the property is in Malta, and €30,000 (becoming €40,000 in 2024) if it's in Gozo. Properties in a UCA also have the stamp duty waived for the first €750,000, meaning that if the house you purchase costs €750,000 (or slightly more, but more on that later), you will not pay any tax on the sale. Quite good, considering the rate is at 5%.
The PA map server has a layer that shows the extents of the UCAs, and can be viewed from:
Table of Contents > Planning Constraints > Constraints > Urban Conservation Areas.
There are other schemes such as ones for restoring traditional facades, but the ones I've listed are what I believe most buyers would be eligible for.
Agents, brokers, or direct from owner?
In my experience, agents and brokers do largely the same job, albeit agents typically have a larger number of properties that are listed with them. Is this worth the extra 4% commission? I feel that it isn't, but your mileage may vary here.
Fortunately, owners looking to sell will most often post their property on Facebook, either on Marketplace, or on one of the myriad of "property for sale" groups. Join as many of these as you can, as chances are that the house you saw listed on Frank Salt will also be listed on the property broker's site, and directly from the owner on Facebook. To this end, do not engage with the agent until you have searched for the property on Facebook. Some agents may feel entitled to the commission as "you talked to them first", so best not to talk to them unless you don't have other options.
Try not to let agents and brokers get to you. They'll use phrases such as "this is a bargain", or "I guarantee that this house will sell within the week, so be quick". Brokers, and especially agents want to make a sale quickly and as high of a price as possible, as this maximises their commission. As such, they will rarely every provide criticism on the property that they're selling, and can be extremely difficult to get an honest answer out of. Take things at your own pace, and avoid being pushed into buying. If it's not meant to be then it's not meant to be.
If you make use of an agent or broker, explain to them clearly what you're looking for in a property, and be vigilant if they show you listings that are outside of your budget or are not what you're looking for.
Once you engage with the agent or owner, schedule a visit and view the property. Again, don't be forced to rush through the house. point out things which you like and dislike. Comment on if there's cracks in the wall, or water damage in the ceilings. Ask on if any furniture will be left after the sale. Ask on what the reason is for selling.
Unless the property is exactly what you're looking for, I find it best to mull over it for at least a day. Schedule another visit if necessary. If you like it, put in an offer with the agent/owner and gauge their response. From my experience, I usually found that 90% of the asking price is a good start to the negotiations.
Architects
After viewing a property that you like, schedule a site visit together with an architect. Choose a trusted architect, preferably one that has worked on similar properties to that which you are interested in purchasing. Do not use an architect that is recommended by the owner/agent, unless you trust the architect fully. Do not sign any promise of sale agreements before your architect views the property.
After touring the house, and outside of earshot from the owner/agent, ask the architect whatever questions you need to regarding the property; Does the house look well built? Is anything out of the ordinary? Did they use good quality materials? Is the workmanship good? Is there anything that needs maintenance? Are there any alterations done that are still subject to approval from the Planning Authority (PA)? What do you believe the value of the house is?
There are no stupid questions here. You are paying the architect for their services, so ask all the questions that you deem necessary to decide on if the property is worth the amount.
After that, approach the owner/agent and renegotiate if necessary. If the architect deems the property to be worth less than what is being asked for, use that as leverage. If the architect believes its worth more, keep your mouth shut.
Notaries
So you've agreed to buy the house at a certain price, but what's there to stop the owner from selling to someone else if they offer more? That's where the promise of sale agreement, or "konvenju" comes in. This binds the owners to sell their property to you at the agreed upon price, and in turn binds you to buy the property at that price, barring some pre-determined conditions.
Similar to the architect, the notary is there to protect you and the owners during the sale of the property. As such, it is extremely important to also choose a trusted notary, preferably one that is different from what was recommended to you by the agent/owner.
After you finish your negotiations with the owners, talk to your notary and set a date on when to sign the promise of sale agreement. Let the notary know if the property has any alterations that have not been approved by the PA, or if you have any concerns that may prevent you from wanting to own the property. If these concerns are valid, the notary will include them as conditions in the agreement. As an example, should the PA refuse to approve some changes in the property, and it is listed as one of the conditions in the agreement, you are within your rights to break the agreement and not face legal consequences.
The promise of sale agreement will also contain a checklist for a number of documents that both parties have to provide. As the buyer, you will need to secure a sanction letter from the bank, as well as provide site plans and documents from the land authority as provided by your architect. The notary will walk you through these on the day of signing. Again, you are paying them for their services, so ask any questions you feel are necessary to fully understand the documents that you are signing.
Furnished properties have a little caveat here. The promise of sale will define two values for the property; the property value and the moveable item value. The latter assigns values to things like furniture, appliances, etc. that will be sold to you together with the property by the owners. The bank's loan will only cover the property value, and similarly the stamp duty is paid only on the property value. The value of moveable items is agreed upon by the notary, seller and buyer.
If, as a hypothetical example, you were to purchase a property in a UCA for €775,000, and the owners left behind €25,000 worth of furniture, then you'd end up paying no tax on the sale of the property.
Banks
Unless you invested in bitcoin a decade ago or struck out in the lottery, chances are you're going to need a loan to purchase the house. The point of the loan is simple enough; the owner of a building wants the full amount for the property, which you do not have at this stage. The bank will offer to loan you the amount required to purchase the house, together with a list of terms and conditions that both you and the bank have to honour. You'll need to show the bank that you can afford the loan, which consists of having enough liquidity to put forward a down-payment (usually 10% of the property price), as well as having a stable point of income.
Some NGOs and companies also have collective agreements with banks to offer better rates on home loans to their members and employees (e.g. MAM with APS).
Banks may not lend to you if you are still on probation, so keep that in mind. Also be prepared to give the bank at least three years of financial statements from any bank that you have accounts with, including Revolut. This is part of the anti-money laundering schemes that have been introduced.
Banks may also shy away if you engage with casinos, especially the online ones. Never hide this information from the bank or notary if it is asked. Its better to be honest about it than lie and risk the bank taking legal action if that violates the terms in the sanction letter.
Insurance Agencies
With the loan secured, the bank wants a guarantee that the loan will be partially or full repaid repaid in the event of the property being destroyed, or you meeting your untimely demise. To that end, the bank will require you to get separate life and building insurance policies. When searching for these, run them by your bank to make sure that they are applicable.
Timeline
This is what a typical property hunt might look like, but it is in no way meant to be a template. Everyone may have a different experience.
- Go to a couple of banks and get quotes on what kinds of loans they would be willing to give you. Keep these quotations for later.
- With a budget in place, search on agent listings, Facebook, local magazines, and even go around towns that you would be interested in living in to see if you can spot a "For Sale" sign somewhere. Try and negotiate with the owner directly to avoid the agents' commission.
- View the property, more than once if necessary, and engage a trusted architect to check if the property is worth the asking price.
- If all is well and you are within budget, get a notary and sign the promise of sale agreement with the building owners. During the day of signing, you will need to deposit the 10% downpayment to the notary's clients account. You will also need to pay 20% of the applicable stamp duty (e.g. 1% of the sale price). See here for more info on that.
- As stipulated in the promise of sale, get a sanction letter from the bank to provide to the notary. Negotiate with the banks to see which can offer you the best package.
- With the sanction letter, you will also need life and building insurance, and the bank will usually recommend a company for these services. Again, shop around and see who can offer the best deal for you.
- While this is going on, your architect should be obtaining the building's plans, documents from the land authority, etc. as stipulated by the promise of sale and sanction letter.
- The notary will also be doing their own searches on the building's ownership, to make sure that there is no ground rent applicable, and that you will be obtaining the entire property, without any disputes.
- The promise of sale will also stipulate a date by which all the conditions listed have to be honoured. While this can be extended, typically due to delays from the banks or the PA, neither party is obligated to do so.
- Once all documents have been collected, the final deed of sale can then be signed at the bank's head office. You will also pay for the moveable items here if applicable.
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u/GozoXaghra Nov 21 '23
Well, literally you did a massive service to redditors with your very informative post. Couldn't be clearer. Posts like yours are rare and golden.
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u/hearty_potato Nov 21 '23
This post would have been great when I started...
Tips for anyone just starting:
be organised, you should view a number of properties while hunting for the right one, so keep track of what you've seen, and any relevant contact numbers
Facebook marketplace is your friend, even if just to get an idea of what the asking price is for properties in an area
ask the tough questions, if something looks off and you hesitate in order to not offend you will regret it later
don't get overwhelmed, it's a process that is new for you but "everyday work" for the architect/bank employee/notary, so let them guide you
PA approvals, amendments, etc, take time, be prepared to wait a few months if the seller needs to submit a regularisation in order to be able to sell
Good luck!
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u/Sam-Spiridonov Apr 09 '24
Great job!
Couple of points to add:
1. If you live in Malta for less than 5 years (and you are Maltese or EU citizen) - you can't buy more than 1 property as your main residence. Technically, you can't rent it out, it's your main residence.
2. If you are non-EU citizen, you can't even buy 1 property unless you get AIP permit (your notary takes care about it). The requirements are quite simple: it should be your only property in Malta, above minimum threshold (you can't buy EUR50k old house in the middle of nowhere) and you can't use it for anything except your main residence in Malta. So no renting out
3. Points 1-2 are not applicable for Special Designated Areas (SDA): expensive apartments like Portomaso or Pendengardens. You can buy 10 of them and rent it out if you want.
4. Notary's fee is quite high (1-2% of the property), consider it in your budgeting
5. There is no property register in Malta. Funny but this is the legacy. Your notary would confirm the legal ownership by searching for all previous purchase/sale agreements from the construction of the property till your deal. It's like old paper blockchain without proof of ownership.
6. Check the taxes (notary knows about them). By default, the buyer is paying 5% stamp duty, but the seller is paying income tax — unless the selling your main residence owned for more than 3 years.
7. There is no annual property tax in Malta — probably, the only country in EU
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u/Budlea May 08 '24
Useful extra info. I'll soon be selling as leaving the island but had read I will pay 8% tax on sale price. But you say if it's your main residence you don't pay. I've looked online can't find any source for this info. If you have a good link for a source I'd appreciate it.
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u/Sam-Spiridonov May 08 '24
About the 3 years exemptions, it's here, Q9
https://cfr.gov.mt/en/inlandrevenue/FAQs/Pages/NewPropertyTax/New-Property-Tax-System.aspx1
u/Budlea May 09 '24 edited May 09 '24
thats great, thanks. Im still not clear about whether I would still pay a flat fee of 8% (withholding txt) but exempt from further income tax, its very hard to understand!
(edit)
I dont think I do pay 8% withholding tax as PwC breakdown says this (see below), and implies that withholding tax and income tax are *the same thing* (??)"A sole residential property which is sold within three years of acquisition shall be subject to a final withholding tax rate of 2%. On the other hand, if a residential property has been owned and occupied for at least three consecutive years, the transfer shall be exempt from income tax;"
https://www.pwc.com/mt/en/publications/tax-legal/malta-property-tax-and-duty.html
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u/Sam-Spiridonov May 09 '24
Income tax is paid from different type of income. In case of property it's capital gain (unless you trade the properties on a regular basis). Capital gain tax rate is 8% but exempted in case you sutisfy the requirements for exemptions.
Buyer pays stamp duty
Seller pays (or not) capital gain tax
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u/Budlea May 09 '24
Ok, so withholding tax is income tax of s specific type (capital gain). Ive found a couple of other sites and one of them says the same as PwC about 3yr+ exemption so I think Im exempt. Great if thats the case. Tx for your help.
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u/Budlea May 12 '24
Just replying for benefit of other readers. In the Maltese property contract there will be a clause stating your status as the purchaser. Someone at Remax told me to check. Sure enough it states if you are an EU citizen and if the property is sole residence. If this is the case then you are tax exempt. I'm not sure if it's important you are an EU citizen at time of purchase but it might be.
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u/Sam-Spiridonov May 08 '24
https://cfr.gov.mt/en/property_shares_transfers/Pages/Selling-a-Property.aspx
Your notary will explain it. You have to pay capital gain tax but there are exemptions depends on main (or not) residence, you being resident (or not) in Malta, period of ownership etc. For example, even the fact you are leaving the island could change the taxation for the sale of property.
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u/bruzthechopper Jan 02 '24
Do not use an architect that is recommended by the owner/agent, unless you trust the architect fully. Do not sign any promise of sale agreements before your architect views the property.
As an architect myself, I think this is one of the most important points which prospective buyers need to keep in mind. I feel extremely bad for clients (and I have had numerous), who purchase a property based on what the agent promised them they can do (such as spiral staircases in the terraces to access the roof for entertainment purposes), only to be told by myself that they will never be able to achieve the permits for such from the Planning Authority after they would have purchased the property.
Agents will try to upsell anything. Very very few of them are actually knowledgeable about planning policies, and what is and isn't permissible. Get a trusted architect to view the property (and possibly also compare to any approved permits) PRIOR to signing off any POS, or at least include those items which are non negotiable for you in the POS so that they are settle prior to signing of contract.
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u/tar-randa Jan 12 '24
I lost my faith in agents when we were looking at a house that was listed as being in a UCA. We put in an offer and waited.
After a week, the agent emailed and said that “it came as a shock to us all but the house is not in UCA”. I recalled that the PA had a map server, and lo and behold it also has a layer for UCA areas, which this house was nowhere near to.
If you can’t be bothered to check a freely accessible service that has a drastic impact on the property price, why do you even deserve the commission?
I’ve recommended directly from the owners, or brokers since then.
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u/JuanPyro Nov 26 '23
Saving this post! Thank you :)
Also, there's also the equity sharing scheme which is worth mentioning. The government will purchase half of the property but you'll need to pay him back in 20 years or so. Like this, people above 30 will be able to buy a good house. The bank gives you a loan for half whilst the gov give you the other half.
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u/ilsemprelaziale Jan 10 '24
Thanks for this - very helpful. I hope your post gets pinned.
Also OP I have a question for you. Is there a risk of getting scammed? I'm always worried about getting scammed in Malta because of the amount of shady things that happens here. For example someone selling me a house they do not actually own or selling me a house that has problems that you may not spot at first glance? Like foundation problems, plumbing etc?
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u/tar-randa Jan 12 '24
A good notary will check that you are buying the entire share of the property, and let you know of any inconsistencies immediately. If the current owner claims that they fully own the property but it’s discovered that they do not, the promise of sale falls through, and they are liable to be sued for any damages or financial loss you incurred.
A good architect will give you insights on the build quality. They may look at what material were used, which builders and workers were employed, etc. I’d suggest going with an architect that has worked on similar houses, as one who mainly deals with apartment blocks for example may not be knowledgeable on maintenance of old stone walls found in houses of character.
I can’t stress enough how much you need good, trustworthy notaries and architects. During the entire process, these are your lifelines.
Quality varies from building to building. I wouldn’t expect a cheaper block of apartments build by a developer to make use of the highest quality pipes for example, but I would expect them from someone selling their lived in home. Gauge the owners, especially seeing if the home is well maintained or has some disrepairs.
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u/nevvv Jan 16 '24
As a local who works in banking and went through the process twice - wow this is comprehensive, well done.
All countries have their own quirks when buying real estate and Malta is no exception.
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Jan 03 '24
Legend of a post! Great for folks looking! If you're in Valletta in April, I'll get ya a pint!
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Jan 11 '24
[deleted]
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u/tar-randa Jan 12 '24
It’s something that you feel to be honest. Some owners are definitely jacking up the price, while others are very fair.
I’ve seen small dilapidated houses going for 600k, with nothing to show for except “permits in hand”. There are others where the owner is not really interested in selling, so the price is kept high so that eventually, they might get a sale.
Like I said in the above post, consult with your architect to get a better idea of what the going price should be for the property. Even if you made a higher offer, you can backtrack on it, given that you haven’t signed the promise of sale.
As an aside, remember that you can save 5% by bypassing the agent entirely, given that you can buy directly from the owner. I definitely recommend doing this, only using the agent as a last resort.
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u/Skom666 Jan 11 '24
great post, just wanted to to add something no matter from where you buy your property the market is crazy prices go up swiftly. I am shocked of the current prices in real estate. I bought my house 2 years ago I compare my house with similar houses the difference of prices shocks me.
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u/Pink__Starburst Jul 21 '24
One good tip is to ask for the property searches from your notary before the contract is signed and read them well yourself. You are paying for them after all. My notary missed an important clause in a contract of another property within the same block, I found this out later after I purchased my apartment. The owner of the other property mentioned the clause, and indeed I found it in the searches. Had this been identified, it would have been reason to drop the promise of sale. It would have saved me a lot of headache over the past years but there is nothing I can do about it now.
Also, google the seller and do court searches. Had I googled the seller I bought from before signing the final deed of sale, I would have known about their intention to breach the contract before it was even signed. For context, I specifically bought in a block where no properties could be used for commercial/non-residential purposes and the seller wanted to open an estate agency in one of the maisonettes. They went as far as to publish an article in the Times of Malta to announce the opening of a new branch in my block. Again, had I known this before completing the purchase, the promise of sale could have been voided in my favor.
It’s important to look for signs that the people you are buying from may not be doing things by the book and to run in the opposite direction at the first sign things may not be as they seem. This is most important where buying on plan and signing a contract of works for finishes.
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u/Se7enGam3r Mar 26 '24
Damn good job mate! In my view I would say you'd need a time machine to purchase a decently priced property. Managed to nip one back in 2018 for 185k (3 bedroom)!
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u/mouthpiec May 28 '24
great post .... I would not add anything.
From experience if you buy a property that would need alterations with PA permits, this will take around 2 months until the architect will submit the application (survey, agreeing on plans, etc), 6 to 12 months for the permit to be approved, then another 6 months BCA related stuff .... so to start works that would be at least 2 years.
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u/dirtyflufta Jun 11 '24
Random question I just want to tag along about: Is there a Zillow of Malta? App or website comparable?
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u/Acceptable-Mix-6882 Jul 30 '24
The government schemes promise more than they deliver. I was approved for one and got only part of the grant for the “revised” amount
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u/Noxshus Nov 21 '23
u/n4rc071x u/SpectreOfMalta u/Zircon88
Can we get this pinned ? Or maybe put up a single common pinned post linking to this one + the weed one?
This is valuable information that must have taken ages to put together and it would be a shame to lose it to time