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Majority of Young Adults in Malta Live with Parents Income Inequality in Malta
Last changed: August 03 2024 07:24 by PCLMedia
Family Support and Rising Property Prices Shape Malta's Homeownership Landscape
Research by the Foundation for Affordable Housing reveals that approximately 59% of Maltese individuals aged 18 to 34 live with their parents. This co-residence rate is among the highest in Europe, but it allows young people to save money and subsequently achieve higher homeownership rates compared to the rest of the continent.
In 2022, Malta's homeownership rate was 82.6%, significantly above the European average of 64.1% and the Southern European average of 75.5%.
The findings were detailed in "Entryways to Homeownership," a publication by the Foundation for Affordable Housing, which seeks to provide sustainable solutions for today's housing market. The report underscores the pivotal role of family in Malta's housing system and examines how familial networks help young people navigate rising property prices.
The study indicates that some young adults stay with their families to save for home purchases: 10% of properties bought between 2010 and 2020 were gifted by parents. The proportion of properties acquired through gifts or inheritance surged from 10% in the 2000s to 21% in the last decade.
Financial assistance from families, including cash transfers and loans, helps counteract the challenges posed by rising property prices and boosts the purchasing power of potential homeowners. Besides monetary aid, families use social networks to connect new homeowners with professionals in the housing industry, providing benefits like favorable loan terms or reduced fees, and transferring skills and expertise across generations.
Historically, initiatives by the state and the Church significantly promoted homeownership in Malta by offering land at reduced prices and subsidizing loans for home construction. However, with the depletion of undeveloped land and reduced state and Church involvement, there is now a greater reliance on familial support, exacerbating wealth inequality in access to housing.
A 2022 report by accounting firm KPMG highlighted that young, single individuals with average incomes cannot afford 95% of properties on the market. To address these issues, the Foundation for Affordable Housing introduced LoanUp, a program offering subsidized loan rates to improve housing affordability and provide innovative solutions to Malta’s housing crisis.
Income Inequality in Malta
While the income gap is narrowing across Europe, Malta remains an outlier, with only four EU countries having greater income inequality. A KPMG analysis shows Malta's income inequality has reached 33%, exceeding the EU average of 29.6%. The countries with larger gaps are Bulgaria, Lithuania, Latvia, and Portugal. Malta’s income inequality has sharply increased since 2019, despite a decade-long trend of decreasing inequality in Europe.
Malta’s welfare state plays a crucial role in mitigating income inequality. Without welfare support, income inequality would soar to 44%, underscoring the welfare system’s importance in promoting a more equitable society.
Economic Growth and Inflation
Despite challenges, Malta's economy showed strong growth through 2023 and early 2024. The accommodation and food services sectors performed particularly well, and the construction industry is recovering after a prolonged contraction. Employment is robust, with over 306,500 people employed, a 4.6% increase from the previous year. KPMG predicts the unemployment rate will remain steady at 3.1% until 2026.
Inflation is also declining, with price inflation expected to drop to 2.4% in 2024 and 1.9% by 2026, down from 5.6% last year. Although Malta's inflation rate was higher than the Eurozone average for most of 2023 and early 2024, this trend has recently reversed. The inflation rate reflects ongoing energy subsidies, which the European Commission notes are not being reduced quickly enough.
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