The new Governor of the Central Bank of Malta, Alexander Demarco, told The Malta Independent on Sunday that "in the last five years, we've seen from our indicator that there was some element of undervaluation in properties, but we're seeing the extent of this undervaluation gradually diminishing."

This conclusion is based on an index published regularly by the Central Bank itself, the CBM Governor stated.

"Properties are tending more to being correctly valued now," Demarco said.

Property prices have risen by some 75% in the past decade - around 5.5% or 6% per annum, he said.

Demarco noted that "prices are rising but that is one side of the coin."

He remarked that segments of the population on low incomes find it difficult to purchase property, but "purchasing property was never something easy, even in the 1980s and 1990s." Demarco told this newsroom that buying property has always involved personal sacrifices and dismissed the claim that previous generations had it easier than youths today, since "wages in those days were much lower" and certain items, like electronic goods and cars as well as travelling abroad, were "relatively much more expensive".

He said income levels in the Maltese islands continue to improve and, crucially, the ratio between property prices and income levels in Malta has been on the downturn since 2009 but after 2016 affordability was even better than in the EU, according to Eurostat data.

Demarco observed that in 2024, Malta's price-to-income ratio for property more or less reached the same affordability levels as back in 2005 - "even though prices have increased a lot." He said that as this price-to-income ratio comes down, "affordability improves."

Aside from female employment rising to improve household income, the governor attributed this improved affordability to Maltese-born people shifting away from low-paying jobs to higher skilled ones, resulting in improved income levels. He also recalled wage increases being experienced "because we have a tighter labour market situation."

Demarco commented that if property prices were not affordable, Maltese homeownership rates would have declined, which is not what statistics show. He also acknowledged that Malta has a culture of homeownership.

Homeownership is strong

Demarco, who was appointed to the post at the start of this year, said that the question on housing prices is linked to affordability and implied that even though property prices across the country are on the rise, Maltese homeownership rates remain very strong.

Last December, just weeks before his appointment to CBM Governor, he told The Malta Business Weekly that according to CBM estimates, property prices were undervalued by some 5% over the past three and a half years. He also cited past CBM reports that found that there was property overvaluation prior to the 2008 financial crisis, before a period of undervaluation came in.

"We try to estimate whether there is an overvaluation or undervaluation of property prices," Demarco said.

Last month, Prime Minister Robert Abela stated that nine in every 10 youths under the age of 35 own their home. The Prime Minister referred to  data provided by Demarco's interview with the Malta Business Weekly, based on the Bank's Household Finance & Consumption Survey that deals with households, stating that, "whereas in 2014 home ownership among the Maltese in the 16 to 34 age cohort stood at almost 81%, by 2023 it increased to 91%, three times as much in the EU.

Similarly, among those in the bottom income quintile, home ownership grew from about 58% to almost 61% during such period, nearly a quarter more than the rest of the EU, such that these developments do not indicate a housing affordability crisis." It was later clarified that this data made reference to households, not individuals, i.e., in households where all residents are 35 or younger, 91% of these residents own the property.

Demarco this time provided also homeownership data pertaining to individuals, which nevertheless still played a similar sounding flute.

Citing an Esprimi survey from last November, he referenced that across all participants of at least 16 years of age, 51.6% of survey respondents fully owned their home and 24.6% declared shared ownership. Furthermore, 12.6% said they intend on buying property, meaning that 88.8% of these adults (virtually nine in every 10) either owned, co-owned or intend to purchase their own property. Just 11.2% answered that they do not own a property and don't intend to in the future.

In addition, for adults aged between 25-34 years, 76.3% either fully owned or co-owned the property. From this cohort of respondents, 42.3% fully owned their home, 34% had at least partial ownership, 11.3% said they aren't homeowners yet (though they intend to be), and 12.4% neither owned a home nor plan on buying property.

The governor highlighted that among 16-24-year-olds within this survey, 18.4% own a property (fully or partially), and some 60% of these respondents said that while they aren't homeowners, they plan on buying.

"Some people have done better than others"

On this, Demarco said that "this shows that, essentially, most of these people see it feasible for them to become homeowners." When asked whether this data could point towards Malta's homeownership culture rather than the feasibility for youths to become homeowners, the governor stated that "it's because they believe they can buy it" and that these youth respondents wouldn't have declared their intention to purchase property if they thought at the time that they couldn't afford it eventually.

"If they were discouraged completely and thought 'listen, no, I'm out of the property market - it's useless to plan,' there's no point of planning if you know you're out of the market," he said.

When told that nearly one in five people in Malta are living or are at risk of poverty and social exclusion, the governor said that this statistic provides "a lot of misconceptions because it deals with relative and not absolute poverty." He argued that this statistic measures those people who earn less than 60% of the median income, which had increased.

"While people have done better over time, some people have done better than others," Demarco said on poverty and social exclusion in Malta.

In this regard, he noted that many who are at risk of poverty and social exclusion are pensioners, since "relatively speaking, they have fallen behind the increase in household income dependent on wage earners." Indeed, he said that material deprivation in Malta, which measures absolute poverty, has dropped significantly in the recent past.

Demand for property

Demarco commented that economic growth experienced from 2016 onwards boosted the demand for property. He attributed this to strong increases in employment through migration as well as higher female participation shooting up drastically; the latter increased households' income across the board, while migration - since migrants stay in Malta for an average length of three years - increased demand for rental accommodation, Demarco noted.

He added that very low interest rates for a prolonged period since the great financial crisis of 2008 pushed Maltese people, especially after 2016, to invest in property as financial assets were yielding "very low returns" at the time. Demarco said that this environment fostered real property demand since the demand for people to invest in a property strictly for investment purposes was being met by the influxes of people looking for rental accommodation. All this was occurring while more people were working, while tourism numbers began to grow steadily, and online platforms like AirBnB began to emerge to make it easier to connect property owners to tourists, he continued.

Today, around 35% of bed nights stayed by tourists in Malta are recorded in rental apartments, Demarco added, highlighting the "real demand" within this sector.

Property prices have been fluctuating significantly since the turn of the millennium. When Malta was about to join the European Union, this created a wave of expectations for EU residents to purchase property in Malta, resultantly causing property prices to go up by some 60% between just 2005 and 2008. Due to these expectations of big profits, building permits had risen from around 6,000 units per year to 10,000 during this span, the governor said.

This slowed down majorly following the 2008 financial crisis, through which building permits slumped back down to 4,000 units annually as expectations deflated.

National debt

This newsroom asked Governor Demarco whether it is truly concerning, from a financial point of view, that Malta's national debt continues to rise to new all-time high. He responded that "if the GDP is growing faster than the debt, then it's not that worrying."

Demarco made it clear that to correctly analyse national debt levels, instead of seeing it in euro terms, e.g., that the national debt currently sits at €11.2 billion, according to the NSO's latest update, "whether it's sustainable or not is discussed in debt with respect to GDP." GDP is essentially the total income earned in a country, he said, on which the government earns tax revenues from; therefore, the higher the GDP, the more revenue government can earn and the more it can sustain its expenditure.

As an example, he said that a person with a debt of €300,000 and an income of €45,000 can theoretically pay their debt quicker than someone with a debt of €200,000 and an income of €25,000, even though the first person has higher debt in euro terms.

Malta's annual GDP in 2024 was recorded to be €22.47 billion. Even though the national debt has practically tripled since 2008 - from some €3.5 billion to over €11 billion - Malta's debt-to-GDP ratio has improved to around 47%.

However, when asked if Malta should be experiencing budget surpluses if the economy is performing so well, the governor responded that ideally, the country shouldn't be running budget deficits when GDP is growing at very strong rates. He noted that to bring down the national debt in euro terms, then fiscal surpluses are needed, because as long as a country runs fiscal deficits, the debt in euro terms inevitably rises. Malta hasn't experienced an annual budget surplus since 2019, though the deficit has recently been in constant decline.

With Malta's debt being much less than 60% of GDP, in line with Maastricht rules for countries in excessive deficit procedures, "we have sufficient fiscal space to counter shocks to economic activity," Demarco said. He stated that "shocks will happen," and so the government must be responsible enough to retain this "sufficient cushion" so that it will be able to run higher deficits when shocks occur to support the economy without compromising the EU debt rule.

In addition, the governor noted that due to new fiscal rules implemented last year, EU countries must be more careful with their public expenditure going forward.

$1 billion Board of Peace permanent membership

The Central Bank Governor was asked whether or not Malta can afford to pay the $1 billion permanent membership fee to join US President Trump's Board of Peace, should Malta accept the invitation.

Demarco declined to comment as he said that this is not a matter in the remit of Central Banks.

On Monday, 26 January 2026, Prime Minister Abela told Parliament that the government had been invited to join this Board and that it is weighing its options.

The Board of Peace is being promoted as a new international conflict resolution body, with its first mission looking towards facilitating a peace plan in the rebuilding of the Gaza Strip. Critics are hesitant that this Board may sideline the United Nations' Security Council if given priority by global players.

In this light, Governor Demarco told this newsroom that geopolitical developments between the USA and other countries, "may create opportunities for investors to switch from US assets to other jurisdictions," creating new opportunities. He affirmed that empirical evidence shows that Central Banks should be independent from governments worldwide as they deliver better results on price stability.