The correlation between house prices and home-leaving rates in Malta

Abstract

Eurostat data shows that young Maltese adults take longer to leave the parental household than their European counterparts. In 2022, the estimated average home-leaving age for males and females stood at 30.8 and 28.7 years, respectively. At the same time, the Property Price Index (PPI) shows that the trajectory for house prices is upward sloping. These two trends, in tandem, motivate the objective for this study. Thus, the main aim is to analyse the correlation between Maltese youths’ home-leaving age and house prices. By implication, the research question proposed seeks to understand whether an increase in the house price index results in a delay in the age at which youths emancipate from the parental household. A quantitative questionnaire is utilised to collect the required data that satisfies the variables which feature within the regression analysis. These variables are motivated by the existing literature and are thus proven to be significant influences on the home-leaving age. A multiple linear regression model (MLRM) is employed to test the correlation between the home-leaving age and the key independent variable, house prices. Gender, income, education, marital status, and government incentives are used as control variables. The variable concerning culture is discussed but does not feature within the regression analysis due to the anticipated high correlation with the key independent variable. Through econometric tests, the issues relating to multicollinearity and heteroskedasticity are observed and mitigated accordingly. Furthermore, endogeneity issues are discussed as there are bound to be more explanatory variables that are correlated with the dependent variable, but which do not feature within this dissertation. The key findings suggest that as the house price index increases, the home-leaving age increases as well, confirming a priori expectations. Also, the hypothesis being tested which indicates that there is a positive correlation between the home-leaving age and house prices, is confirmed. Other findings concerning the supplementary variables enhance the overall quality of this study by suggesting a positive correlation between the dependent variable and education, and a negative correlation with the dummy variables for gender, marital status, and government incentives where the latter represents the first-time buyers’ (FTB) scheme. Consequently, a discussion on the required political and governmental intervention to slow down the growth in the home-leaving age and house prices is presented. This is aimed to increase the awareness on the lack of affordability that is impeding young adults to venture out from the parental household which is subsequently creating difficulties for all the parties involved.