Housing affordability in Malta

In recent years, concerns about housing affordability in Malta have become more pronounced due to the escalation in property prices.

In essence, housing affordability relates to an individual’s ability to pay for housing – a basic human need. When housing affordability is being discussed, one could consider whether an individual is able to rent a property; or their ability to purchase a property in their lifetime. Here we are talking about the latter.

Since most first-time buyers rely on bank borrowing to finance the purchase of their house, one way to measure affordability is to measure the buyers’ borrowing capacity. The maximum house price that a household can afford will depend on the household’s income; the prevailing borrowing rate; and other leverage requirements. Other leverage requirements could include required down payments, for instance, in Malta, a 10 per cent minimum down payment is generally required by commercial banks for first-time buyers.

If the market price of an average property exceeds the maximum affordable house price level, then the average household would have affordability problems.

The number of individuals in a household who receive an income will...