Second homes and financial assets prop up wealthiest 20%

Second homes account for one-third of the wealth accumulated by Malta’s richest 20%, a Central Bank survey on household finance and consumption reveals.

The report breaks down both the real and financial assets owned by the 1,018 separate households surveyed, which were broken down in five equal groups: the first quintile being the poorest, and the fifth the richest.

The richest Maltese’s tangible wealth was made up of business assets from self-employment (8.7%), but 56.6% of their wealth was derived from the value of their homes, while cars and valuables barely accounted for 2%.

Residential homes accounted for 91.2% of the assets owned by the second wealth quintile, that is just above the poorest quintile. To the contrary, it is cars that represents 31.7% of the assets owned by the lowest wealth quintiles, which compares with a share of under 5% for the wealthier quintiles.

As expected, assets from ‘other properties’ that are not residential homes, started falling to under 15% among the fourth quintile to below 5% for the two poorest quintiles.

The study finds the median value of residential properties increasing from a reported €200,000 in 2017 to €300,000 in 2020, while that of “other properties” doubled to €175,000 in the same timeframe.

Overall, the survey shows that 26.5% of Maltese households owned other forms of property apart from their primary home, including second homes, garages, commercial premises, and agricultural land parcels. Around 8% of these other properties are located abroad.

Vehicles were the most held asset type, owned by 86.2% of all households, closely by the household’s main residence (79%).

Only a tenth covered by a private pension

Only one in 10 households disclosed that they were covered by a voluntary pension scheme or by a life insurance policy in 2020. The percentage is even lower among poorer households.

Nearly 25% of the financial assets held by households in the fourth wealth quintile are held in the form of pensions. This quintile is the second richest segment of the population. But the percentage drops to less than 10% among the poorer segments of the population, and to less than 5% among the poorest quintiles.

Private pensions are also less of an investment option for the richest fifth of the population, which are more likely to opt for investment in shares and securities.

Bank deposits account for just over 80% of all financial assets held by the bottom quintile, but this share tends to decrease as wealth increases. By contrast, mutual funds and listed shares tend to account for a more sizeable share of financial asset holdings in the wealthier quintiles.

The Central Bank says financial assets and their allocation is linked to financial literacy, reflecting not just income but also educational attainment, risk appetite and age.

Saving patterns

The highest income quintile was able to save a median amount of €1,000 per month, which is five times as much as the poorest quintile, which are able to save a median of €200 monthly in 2020.

72% of households reported they were able to save some of their income in 2020, which coincided with the COVID pandemic. But the percentage fell to 61% in the two poorest quintiles.

When households were asked to highlight the main purpose for their savings, the three most frequent replies related to the provision for unexpected events, old age provisions, travels and holidays.

The coordinated research project led by the European Central Bank, providing household-level data on assets, liabilities, wealth and income.