Who wants what, where?

This snapshot of Malta's housing market reveals a clear divide between first-time buyers and foreign renters in their preferred property locations. It also shows that Malta’s homeownership rate has held steady for a decade.

The average age of first-time property purchasers in Malta is approximately 30 years, the 2023 Housing Authority report reveals. Furthermore, about 73% of these buyers, who took advantage of the government’s grant programme, were aged between 25 and 34 years.

As of 2022, the average age for young people leaving their parental home across the EU was approximately 26.4 years. Malta (30.1 years) is not the only country with a notably higher average age for leaving the parental home. For example, Croatia (33.4 years), Slovakia (30.8), Greece (30.7), Bulgaria and Spain (both 30.3), and Italy (30.0) all had averages of 30 years or more.

The Maltese government’s First Time Buyers Grant programme provides a grant of €10,000 spread over ten years, which amounts to €1,000 per year. This financial assistance is aimed at helping first-time homebuyers with their home loan repayments.

In 2022, approximately 2,750 first-time buyers took advantage of the government’s grant programme. When compared to the total number of final deeds of sale involving households, which amounted to 13,101 for the same period, first-time buyers constituted about 21% of the market. This statistic underscores the significant portion of the property market in Malta that is comprised of individuals purchasing their first home, benefiting from governmental support to facilitate their entry into homeownership.

St Paul’s Bay attracting more buyers

Brian Micallef, Executive Head – Policy at the Housing Authority, explained to The Journal that the demand for property is shaped by various factors such as affordability, migration trends (notably by international workers), government policies and incentives, as well as considerations related to quality of life and local amenities.

The National Statistics Office (NSO) data for 2023 indicates that St Paul’s Bay led in property sales, representing 8.4% of all transactions, followed by Birkirkara (4.3%), Marsascala (3.8%), Mosta (3.7%), Żabbar (3.5%), Msida (3.4%), and Sliema (3.3%).

The preferences for property locations show a clear distinction between first-time buyers and foreign workers in the rental market. Since 2022, first-time buyers have predominantly chosen St Paul’s Bay, Żurrieq, Birkirkara, Mosta, and Żabbar, while rental agreements registered with the Housing Authority show a concentration in St Paul’s Bay and the Northern Harbour areas of Sliema, Msida, Gzira, and St Julian’s.

Notably, St Paul’s Bay encompasses multiple districts including Bugibba, Qawra, Xemxija, and Burmarrad, highlighting its popularity across different buyer and renter groups.

A question of affordability

The income needed to buy a property varies significantly based on factors like the type of property, the purpose of the purchase (e.g. first home vs investment) and the buyer’s status (single vs joint borrowers). It’s more insightful to examine specific buyer categories than to rely on broad averages.

Brian Micallef explained that affordability refers to the relationship between housing costs and household income. Housing costs in excess of 25% to 30% of one’s income is typically assumed to endanger affordability, since the household is left with insufficient funds to cover basic needs. For those aspiring to purchase a property, one must also consider the minimum income needed for a home loan in Malta, factoring in bank regulations and conditions. There is no one-size-fits-all. This minimum income will depend on the property’s value, the age of the borrowers, the loan-to-value ratio (typically 90% for first-time buyers), the interest rate and the debt service-to-income threshold applied by the bank. Depending on the price of the property and assuming a debt service-to-income ratio of 30%, the requisite income to qualify for a loan for an apartment can range from €23,000 to €40,500, revealing the tough choices low-to-medium income first-time buyers must make regarding location, type, and size of property.

Prospective buyers must also have saved enough for a 10% down payment and cover additional costs like notary, architect fees, and insurance. The variation in property values bought by first-time buyers gives indirect insight into their income levels, showing significant disparities. Nearly half of these buyers chose properties valued between €150,000 and €250,000. Single borrowers more frequently bought in this range (57%) compared to joint borrowers (37%), who often opted for more expensive properties, with 23% buying homes between €250,000 and €300,000. Properties over €300,000 were purchased by 34% of joint borrowers and 14% of single borrowers, indicating that joint borrowers generally buy higher-valued properties.

The Housing Authority’s Executive Head explained that the ongoing discussions about housing affordability in Malta and the rising costs of rent and property prices mirror those in other EU countries. He pointed out, however, that contrary to the experience most other EU countries, the homeownership rate in Malta has remained relatively stable over the past decade.

Initiatives that are helping

To address issues of affordability, the Housing Authority has introduced initiatives like the Deposit Payment Scheme, the Equity Sharing Scheme, and social loans, benefiting around 600 households since 2020. These complement other government efforts, including a grant for first-time buyers and a stamp duty exemption on the first €200,000 of a property’s value, aiming to ease the path to homeownership.

The Deposit Payment Scheme is intended to help potential homeowners who can afford the monthly mortgage repayments but struggle to accumulate the initial lump sum needed for the deposit. This is particularly aimed at first-time buyers. The scheme offers a form of guarantee or direct financial assistance to cover the deposit that banks typically require for the purchase of a home. This may vary but often is around 10% of the property’s purchase price.

The Equity Sharing Scheme is particularly aimed at helping older individuals who may not qualify for a traditional bank loan due to age constraints, or individuals who might not afford to buy a property outright on their own. The scheme operates on a partnership between the buyer and the Housing Authority. The Authority essentially buys a share in the property, up to a certain percentage, reducing the amount the individual needs to finance through a loan or savings.

Through the Social Loan Scheme, the Housing Authority collaborates with commercial banks to assist low-income individuals to purchase a property. The authority will assist these applicants by granting them a monthly subsidy on their loan repayment to the banks.

The popularity of apartments

Apartments are the preferred choice among first-time property buyers, with distinct preferences observed between single and joint borrowers. Specifically, a significant 79% of single borrowers choose apartments as their first property purchase, in contrast to 65% of joint borrowers who opt for apartments. This indicates that joint borrowers have a slightly higher tendency to buy houses and maisonettes compared to their single counterparts.

The rental market shows a similar trend, with apartments making up approximately 80% of all registered rental properties with the Housing Authority. Within this segment, two-bedroom and three-bedroom apartments are the most commonly available types. This pattern underscores the popularity of apartments both among those purchasing their first homes and those seeking rental accommodations, reflecting a broader preference for this type of dwelling in the current housing market.

Census data highlights a significant trend towards apartment living over the last decade, with the proportion of apartments in the country’s total dwelling stock increasing from 37% in 2011 to 52% by 2021. This shift is accompanied by notable improvements in dwelling amenities, particularly in the adoption of air conditioning and enhanced internet connectivity, reflecting modern living standards and expectations.

Photo: Polina Kovaleva

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