The impact of Rising Inflation on the Maltese young generation to take out a home loan in early adulthood

Abstract

This research aims to explore the perceptions of Maltese first-time buyers aged 20-27, and their tendency to take out a home loan despite the challenges posed by rising inflation and high property prices. The study seeks to understand how various economic pressures influence decisions regarding homeownership in Malta. To achieve this, a qualitative research approach was adopted, featuring semi-structured interviews with four subgroups: young individuals who purchased property between 2022 and 2024, those currently considering a property-related loan, those opting to rent, and representatives from local banks. Given the limited prior research focusing on these subgroups, primary data was collected. This was complemented by secondary research, which examined the effects of inflation both in Malta and abroad. Thematic analysis was applied to the qualitative data to identify patterns and insights from the interviews. The findings reveal that rising inflation and skyrocketing property prices have created a significant barrier for young first-time buyers aspiring to purchase a home. With the cost of living continuing to climb, stagnant wages and mortgage rates increasing, many young people find it difficult to afford down payments or manage loan repayments, making homeownership an elusive goal. As a result, prospective buyers are opting for renting or postponing major personal milestones such as marriage and starting families. The study suggests that current government incentives are inadequate in addressing these issues, and without substantial policy reforms the prospect of homeownership for young people will continue to diminish. In conclusion, the research highlights the urgent need for more robust government interventions and economic reforms to address the housing-related difficulties faced by young adults in Malta. Without these changes, homeownership will likely remain out of reach for a significant portion of the population, with long-term social and economic implications.