Is it time for Malta to restrict foreign property purchases? Lessons from global policies | James Grech

Malta's property market has long been a pillar of economic growth, bolstered by local de­mand and foreign investment, with government schemes such as the Individual Investor Pro­gramme (IIP) also supporting the latter.

However, in recent years, soaring property prices, over­development and mounting concerns over housing afforda­bility have led to increasing de­bate – should Malta follow the lead of other nations and im­plement restrictions on foreign property purchases?

According to the National Statistics Office (NSO), prop­erty prices in Malta have risen consistently over the past dec­ade. While foreign investment has undeniably injected capital into the economy, it has also contributed to speculative buy­ing. In light of this, the ques­tion arises – can Malta learn from international examples where foreign property owner­ship is restricted? With its lim­ited landmass and escalating property prices, Malta must consider whether such meas­ures could be effective here.

Global examples of foreign property restrictions

Several countries have already taken steps to limit foreign in­vestment in real estate to safe­guard housing affordability for their citizens. Examining these case studies can offer valuable insights into whether Malta should adopt similar policies.

In 2023, Canada implement­ed a two-year ban on foreign property purchases to cool its housing market. However, the impact has been limited, with affordability challenges still widespread, particularly in cities like Toronto and Van­couver. The policy was later adjusted to allow some excep­tions.

New Zealand in 2018 enacted a law that prevents non-res­ident foreigners from buying existing homes. Prior to the ban, foreign buyers account­ed for 22% of sales in central Auckland. While the law has reduced speculative purchases, affordability remains an issue due to broader supply shortag­es.

Denmark and Switzerland also have long-standing re­strictions on foreign property ownership, which have helped prevent speculative bubbles and ensured greater access to homeownership for locals.

The government of Spain’s Balearic Islands in response to skyrocketing property prices, is moving forward with plans to restrict non-residents from buying property in Mallorca, Ibiza, and Menorca, aiming to combat the rise of “ghost towns” where holiday homes remain empty for most of the year.

Austria on the other hand re­quires non-EU buyers to obtain special permits, while Croatia imposes a 10-year residency requirement before foreign­ers can buy agricultural land. These measures have proven effective in curbing speculative purchases.

Which countries have succeed­ed?

Denmark and Switzerland have demonstrated that for­eign property restrictions can help stabilise housing markets, control speculation and keep properties affordable for locals. These countries have ensured that their citizens are the pri­mary beneficiaries of the hous­ing market, helping to avoid a scenario where foreign inves­tors drive up prices beyond the reach of the local population.

Which countries have strug­gled?

Canada’s foreign buyer ban, despite its strong stance, has not significantly improved housing affordability. Con­tinued domestic speculation, combined with supply con­straints, has left the housing crisis largely unresolved. Sim­ilarly, New Zealand’s restric­tions helped to curb speculative purchases but did not fully ad­dress the affordability issue, as factors such as rising construc­tion costs and stagnant wages also play a significant role.

Should Malta follow suit?

Given Malta’s small size, rap­id property price increases and growing concerns over housing affordability, restricting foreign property ownership, especially outside of Special Designated Areas could be a viable solu­tion. Without such measures, the risk of overdevelopment, unsustainable speculation and a deepening affordability crisis will only increase.

Possible policy solutions for Malta include: Restricting for­eign ownership of residential properties outside designat­ed zones where investment is encouraged; similar to Croa­tia’s model, require foreigners to meet a minimum residen­cy period before purchasing property; ensure the timely development of properties pur­chased by foreigners to prevent land from being left idle; and further enhancements in the subsidised mortgage schemes which are already supporting local buyers.

Balancing investment and affordability

Foreign investment has played an important role in Malta’s economic growth, but housing must first and foremost serve the needs of Maltese residents. Restricting foreign ownership does not mean halting invest­ment altogether. It means im­plementing smart, balanced policies that ensure sustaina­ble development while keeping home ownership within reach for locals.

To navigate this issue effec­tively, policymakers should ini­tiate national discussions, com­mission studies on the impact of foreign property ownership and consider tailored restric­tions that align with Malta’s unique economic and social landscape. With the right strat­egy Malta can create a property market that benefits both in­vestors and citizens alike.