An analysis of the first-time buyers’ scheme impact on first-time buyers in Malta

Abstract

The Government of Malta introduced a housing subsidy scheme offered to all first-time buyers in Malta in the 2013 budget. This First-Time Buyers’ (FTBs) scheme sought to reduce the financial burden faced by first-time homeowners in Malta. Those individuals who acquired their first property benefited from a partial stamp duty exemption rate on the value of property. Originally, the stamp duty exemption rate was on the first €150,000 of the property value but the scheme was amended in 2019, extending the exemption rate up to the first €175,000 of the property value. This dissertation sought to investigate the effect of a change in the stamp duty exemption rate of 2019 in the first-time buyers’ scheme on property prices bought by first-time buyers in Malta. This study adopted a difference-in-differences methodology to observe the outcomes from two groups – a control group and a treatment group - for two time periods, namely a prechange period and a post-change period in the scheme. The two groups that were observed were first-time buyers (the treatment group) and all other property buyers (the control group). Moreover, different market conditions required the need to distinguish between the different effects in Malta and Gozo. Since the causal effect coefficient for Malta was statistically significant and positive, it can be definitively concluded that the subsidy scheme positively impacted the price of property bought by first-time buyers in Malta. This finding indicates that the targeted beneficiaries of first-time buyers’ scheme did not fully benefit from the subsidy scheme. On the contrary, part of the benefit is accruing to the sellers of properties through higher property prices. The causal effect coefficient for Gozo was also positive but statistically insignificant, possibly attributable to the small sample size for the region of Gozo. In light of these findings, it is highly recommended that the Government seriously consider the implications and desirability of any further extension of this subsidy scheme.