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Minimum Income Required to Purchase a Property: Conceptual Framework and Application to Malta

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  • Brian Micallef

Abstract

Housing affordability for potential first-time buyers has two components – the ability to borrow sufficiently from a bank to purchase a property (purchase affordability) and the ability to maintain mortgage repayments (repayment affordability). This paper focuses on the first element by calculating the minimum income required to purchase a property in Malta. Most methods in the housing affordability literature are inadequate to capture the purchase affordability concept, which is critical for first-time buyers. For this segment of the population, bank lending policies and conditions play an important role to obtain the necessary credit required to purchase a property. A conceptual framework is proposed that recognizes the numerous factors that affect the minimum income required to purchase a property that ranges from bank lending policies, monetary and macroprudential policies, the external macroeconomic environment and individual and household characteristics and behaviour. The analysis points to the importance that young people engage in some element of saving from the first years of their working life to accumulate sufficient funds that are required for them to be eligible for a mortgage.

Suggested Citation

  • Brian Micallef, 2022. "Minimum Income Required to Purchase a Property: Conceptual Framework and Application to Malta," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 14(10), pages 1-13, October.
  • Handle: RePEc:ibn:ijefaa:v:14:y:2022:i:10:p:13
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    References listed on IDEAS

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    1. Mr. Nikoloz Gigineishvili, 2011. "Determinants of Interest Rate Pass-Through: Do Macroeconomic Conditions and Financial Market Structure Matter?," IMF Working Papers 2011/176, International Monetary Fund.
    2. Glenn Abela & William Gatt, 2021. "Saving behaviour in Malta: Insights from the Household Budgetary Survey," CBM Working Papers WP/02/2021, Central Bank of Malta.
    3. John M. Quigley & Steven Raphael, 2004. "Is Housing Unaffordable? Why Isn't It More Affordable?," Journal of Economic Perspectives, American Economic Association, vol. 18(1), pages 191-214, Winter.
    4. Kelly D. Edmiston, 2016. "Residential Rent Affordability across U.S. Metropolitan Areas," Economic Review, Federal Reserve Bank of Kansas City, issue Q IV, pages 5-27.
    5. Micallef, Brian, 2020. "Real Convergence in Malta and in the EU Countries after the Financial Crisis," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 35(2), pages 215-239.
    6. Reuben Ellul & Jude Darmanin & Ian Borg, 2019. "Hedonic house price indices for Malta: A mortgage-based approach," CBM Working Papers WP/02/2019, Central Bank of Malta.
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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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