I recently helped a friend who was searching for a property to rent during her short trip to Malta. It was surprising how even apartments for short lets were difficult to find. We tried looking for a room in someone’s apartment, but even that proved close to impossible.

This wasn’t the case a few months ago, the reason surely being that with the warmer months and holiday season approaching, more people are visiting the island.

However, ask anyone to compare the situation today with that of a few years ago and they will tell you that more people are renting and that demand is fast outweighing supply.

Those with an ounce of business acumen – and a few hundred thousand euros to spare – have already jumped on this lucrative bandwagon. Buy to let is the way to go.

Douglas Salt, director at Frank Salt Real Estate, says that Malta’s accession to the EU has made it simpler for nationals from other member states to live here.

“Some come to retire in a warmer environment, others to work, mainly in the hospitality industry. These tend to rent in the lower brackets of €350 to €600 monthly, in line with their disposable income.”

The growth of iGaming and financial services has attracted a group of foreigners who can afford to rent in the higher brackets of some €1,000 monthly. As Mr Salt notes, others are here for fiscal advantages and these also tend to rent better properties. In total there are around 30,000 non-Maltese living on our islands and a good number of these are renting.

“As foreigners seek to establish a residence in Malta, the local property market has adjusted accordingly and we have been seeing demand outweigh supply, especially in the more popular areas,” says Ian Casolani, managing director, Belair Real Estate.

“The natural consequence is that there has been a steady increase in people opting to buy property to let it out again.”

A word must be said about the prohibitive rental laws and regulations. Besides the flat 35 per cent tax that has to be paid on rental income, one also typically has to pay licence fees and VAT on rent.

Mr Casolani points out how, in addition to this, foreign owners are generally prohibited from renting out property if it does not form part of special designated areas development. Moreover, buy-to-let loans are not exactly attractive and currently come with high interest rates.

Mr Salt says how the licence fee on long lets that is charged by the Malta Tourism Authority does not make any sense as a long let property is seen by the prospective tenant before any commitment is made, unlike short lets which might be booked over the internet.

However, after years of lobbying, the tax regime on rental yields is fair at 15 per cent.

“We hope that this will encourage people to declare their rental income,” says Mr Salt.

The Maltese have always been property savvy and it has not taken them very long to realise that the rental returns are now much higher than they used to be. Therefore buy to lets make perfect sense and offer very good returns, even when bank-financed.

“It’s worth the investment,” says Mr Salt. “You can also factor in the capital appreciation, which although slightly soft in the last few years, is typically six to seven per cent a year if factored over the last 30 years.”

Speaking of good decisions, ask any property agent to list the three most important things a property should have and the answer will be, “location, location, location”. The same goes for rental property investment. Areas like Sliema, St Julian’s, in particular areas close to the seafront, Ta’ Xbiex, Swieqi, Madliena, Gzira, San Gwann and Valletta remain the most in demand for rental properties.

“Lifestyle developments like Portomaso and Tigné Point are also a good rental investment and top the charts when it comes to the higher end rental market. Rental clients cannot seem to get enough of these locations,” says Mr Casolani.

The reason is that the areas around Sliema are where most foreign offices are based, explains Mr Salt.

Mr Salt adds how all special designated areas attract higher than average yields. If one were to concentrate on short lets, all seaside towns offer good returns too, although these tend to be more seasonal.

A final word on the quality of rental properties: villas with pools are in short supply, as most on the market are a bit dated. Mr Salt says that: “A property needs to have modern furniture, bathrooms and finishings in order to rent well in the higher bracket.”