Richest 1% hold over 10 times median net wealth

The richest 1% in Malta hold over 10 times the median net wealth, according to new survey published by the Central Bank of Malta.

The Bank recently released the full results of the Household Finance and Consumption Survey (HFCS), conducted by Valentina Antonaroli, Warren Deguara and Aleandra Muscat.

The report sheds light on a wealth divide in Malta, with the wealthiest 1% of households possessing more than 10 times the median net wealth held by all households.

Moreover, the wealthiest 5% of households possessed a median net wealth more than four times greater than that of all households combined.

The distribution of net wealth indicates an increase beyond the 70th percentile and a rapid rise beyond the 90th percentile, primarily driven by valuable real assets and a broader portfolio of holdings.

Despite this, inequality as measured by the HFCS-based Gini coefficient decreased slightly to 0.55 from 0.60 in 2017. Back in 2014, the Gini coefficient stood at 0.57.

Wealth distribution across different quintiles showed that the second quintile, with the highest proportion of assets, primarily consisted of main residences, accounting for 91.2% of their assets.

In contrast, the top quintile, representing the wealthiest households, had only 56.6% of their wealth tied to main residences, as they held a significant share (32.9%) in “other real estate” and self-employment businesses.

Vehicles constituted a notable 31.7% of real assets for households in the lowest wealth quintile. Indeed, vehicles emerged as the most owned asset, with 86.2% of households possessing one.

Those dependent on pensions and social benefits are among the first quintile, in turn earning the least amount of money.

Indeed, the report says that slightly more than half of the reference persons in this quintile are pensioners.

In terms of income sources, the fifth income quintile exhibited the largest proportion of income derived from self-employment. On the other hand, the second income quintile had the highest share of income originating from rental income and financial investments.

Impact of COVID on household finances

The study also sheds light on the impact of the COVID-19 pandemic on household finances. While approximately 71.6% of households reported no significant changes in income during 2020, around 26% experienced a drop, with most reporting a reduction between 5% and 25%. Household expenditure adjustments included cutting back on food, clothing, travel, and other consumer goods and services. Savings, financial asset sales, and loan and rent payment deferrals were utilized to compensate for income losses.

Additionally, the report reveals that the median annual household consumption of goods and services in 2020 was estimated at €9,600, with notable variations across percentiles.

The highest gross income quintile had double the median consumption of the lowest quintile, while the top quintile spent three times more on food and beverages consumed outside the home.

Examining the rental landscape, the survey finds that 15% of households are renters, predominantly belonging to the lower income quintiles. However, this figure may be underestimated due to limited participation by foreigners in the survey.

Regarding savings habits, approximately 72% of households reported saving a portion of their income in 2020, with the percentage increasing across income quintiles.

The highest income quintile was able to save a median amount of €1,000 per month, while the lowest quintile saved a median of €200 per month.