The median gross income of Maltese households in 2016 went up by 24 per cent over the previous six years, mainly as the result of higher employee income.
The median income was estimated at €25,417 up by €4,856 per household since 2010.
This information emerged from the latest wave of the Household Finance and Consumption Survey (HFCS), which was conducted by the Central Bank of Malta in 2017, following up on previous editions held in 2010 and 2013.
This survey is held every three years as part of a coordinated research project led by the European Central Bank, providing detailed information on households’ real and financial assets, their liabilities, net wealth, income and consumption patterns
Apart from the trends on income, the survey also showed that more households were able to save, as their income was higher than their expenses. This ability-to-save indicator shows that 46 per cent of households managed to save part of their gross income, up from 37 per cent in 2013 and 24 per cent in 2010.
The survey also sheds light on interesting social trends. For example, it confirms the ongoing decline in household size, which in 2016 averaged 2.5 members per household, down from 2.9 members in 2010, as a result of an increase in the number of one-person households at the expense of larger ones.
The educational attainment level of the Maltese households also continued to improve. Around 19 per cent of the households had a person with a tertiary level of education, compared to 15 per cent in 2010, although the majority – 60 per cent – have a reference person with a secondary level of education.
What are the main sources of household income and wealth in Malta? The distribution of income shows that the highest three quintiles derived most of their income from employment income, while those in the bottom two quintiles relied significantly on pensions and regular social transfers.
One of the key advantages of the HFCS relates to granular detail on households’ balance sheet. On the asset side, it makes a distinction between ‘real’ and financial assets. In 2016, around 87 per cent of total assets consisted of real assets, with financial assets accounting for the remaining 13 per cent. These shares have remained broadly stable across the three waves of the survey.
The median value of real assets held by Maltese households increased from €193,511 in 2010 to €225,752 in the latest wave. Close to four-fifths of ‘real’ assets are held in property. A household’s main residence constitutes the most valuable real asset with the perceived median value increasing from €180,600 in 2013 to €200,000 in 2016. The reported median value of other properties and self-employed businesses stood at €87,501 and €74,736, respectively.
Around 97 per cent of all households held at least one type of financial asset in 2016, with the median value standing at €55,823. As expected, however, the mean values are significantly larger than the median, reflecting the concentration of wealth among the wealthiest households.
Bank deposits remain the most popular financial assets, which are also widespread across lower income and wealth quintiles. Ownership of other forms of financial assets is relatively less widespread: only 22 per cent of households owned security and only 16 per cent held mutual funds and/or listed shares.
The median income of Maltese households in 2016 was estimated at €25,417, up by €4,856 per household since 2010
Deposits account for close to 90 per cent of all financial assets held by the bottom quintile. This share decreases gradually as wealth increases, with securities and equities tending to account for a more sizeable share of financial asset holdings in the wealthier quintiles.
The survey also revealed that only 13 per cent of households were covered by a voluntary pension scheme or by a life insurance policy, with the majority of people affected aged between 35 and 44.
Around one in three households held some form of debt in 2016. Household liabilities consist of both mortgage and non-mortgage debt, with mortgage debt representing 88 per cent of total household debt in 2016. Household debt has increased compared to the previous two rounds, mostly due to higher mortgages taken on. The median value of outstanding mortgage debt stood at €80,000 in 2016.
The ratio between mortgage debt and gross household income stood at 222 per cent in 2016, nine per cent more than in 2013. This reflects the increase in median mortgage debt, which may partly be due to rising property prices and longer loan maturities. Despite this increase, the cost of servicing the mortgage debt as a proportion of the gross household income of indebted households stood at 14.5 per cent, only half a percentage point higher than in the previous round, reflecting the low interest rate environment.
Households’ estimated median net wealth, defined as the total holdings of real and financial assets net of liabilities, stood at €236,529 in 2016, up by 17 per cent from 2010. These values vary considerably across wealth quintiles: the median net wealth of the lowest quintile stood at €12,612, increasing to €692,554 for the top quintile. Net wealth also varies according to the life cycle, peaking for those in the 45-64 age bracket, and it tends to be higher for those who are self-employed or who obtained a tertiary level of education.
The median value of net wealth increased across all household quintiles since 2010. However, the rise in the highest quintiles was more pronounced compared to the lower ones.
This was reflected in the HFCS-based Gini coefficient, which increased to 0.6 in 2016, up from 0.57 in 2010, pointing to a marginal increase in wealth inequality. This is in line with recent studies by the Central Bank of Malta, using not only the HFCS survey but also alternative surveys and administrative datasets.
The above statistics offer just a glimpse of the rich information that is available from this survey, which is published on the bank’s website (www.centralbankmalta.org). More importantly, this survey opens up various avenues for further research in the area. More information is reported in one of the articles in the Central Bank of Malta’s Research Bulletin, which was launched during a Research Workshop organised by the Central Bank this month.
Brian Micallef is the manager of the Central Bank of Malta’s Research Department, while Silvio Attard is a principal economist in the Economic Analysis Department.