Property - Does Malta form part of the Mediterranean property market?

Malta is not the only property destination in the Mediterranean. Geographically, Malta is in the centre of the region, but definitely not at the centre of the Mediterranean property market.

We are talking about an extremely competitive market with several countries vying to attract the largest number of overseas investors, knowing that this creates a multiplier effect.

A clear indication of this may be obtained from data concerning purchases of real estate abroad by UK citizens compiled by the Association of International Property Professionals (AIPP). In 2007, UK citizens invested in 242,000 properties overseas worth €32.8 billion.

Seven out of the top 10 favoured property destinations are Mediterranean countries or have a coastline on the Mediterranean, attracting 143,990 transactions, valued at €19.6 billion. Malta barely snatches 500 transactions annually, valued at €68 million or 0.36 per cent. Some might argue that the €68 million we are attracting is sufficient for a small island, but what is Cyprus doing to attract 7,018 transactions valued at approximately €954 million?

What do these destinations have to offer that we don't? Do they have a more attractive country? Is their sun brighter? Are they more hospitable? Are they more English-speaking? Are their medical facilities better than the ones found locally? Or is their tax legislation designed to entice overseas investment?

Comparison tables clearly spell out the reason why overseas investors seek greener pastures. In general, capital gains taxation on real estate in Malta is less attractive compared to that of other countries, due to its coverage, tax rate and the incentive to retain property. In Italy, for example, all real estate sold after a period of five years of ownership is exempt from capital gains tax, with normal rates of income tax being applicable.

The need to reform the system of capital gains taxation in Malta, to make our market a more attractive destination for international real estate business, it is fairly obvious from even a casual examination of the comparative table assembled higher up. Such reform could take the shape of a flat 15 per cent capital gains tax on realised profits from real estate transactions if Malta is to be rendered competitive with other countries around the Mediterranean littoral.

A measure of this nature would stimulate activity in the property sector and enhance affordability for both local and international buyers. As with other sectors of the economy, competitiveness is the name of the game.

Malta must shrug off its insular mentality when it comes to property. This industry must be rendered competitive if it is to succeed and thrive. It must be made competitive here and now, if one reckons that some three million British people are likely to be tempted to invest in property overseas within the next two years.

According to recent research by Carter Allen Private Bank, a subsidiary of Banco Santander, economic conditions in the UK make strong returns from domestic investments less plausible.

Mr Busuttil is chairman of the Real Estate Trade Section of the Malta Chamber of Commerce and Enterprise, president of the Federation of Estate Agents and managing director of Propertyline International.