AirbnBAN | The Role of Short-Lets in Housing Pressures
- Spunt Malta
- Nov 26
- 4 min read
Malta’s housing market has entered one of its most accelerated phases in recent decades. Average asking prices for apartments rose from roughly €374,000 last year to more than €414,000 today, an increase of around €40,000 in just twelve months. The price per square metre grew by more than 14 percent, even as average unit sizes fell. This continues a long trend: apartment prices are almost 60 percent higher than they were in 2017, and national house price indices show an increase of more than 50 percent since 2015.
Affordability indicators confirm the strain. A young couple on the minimum wage, earning about €23,000 jointly, can now afford only around 2 percent of properties on the market. Even average-income couples, earning around €51,000 together, saw their accessible share fall from nearly 80 percent last year to around 70 percent today. This shift reflects a widening gap between wage growth and property appreciation, and it explains why increasing numbers of first-time buyers rely on parental transfers to secure a home.
The pressure comes not only from population growth and a limited land supply, but also from the behaviour of the market itself. Property functions as Malta’s main investment asset, and purchasing motivated by expected capital gains has become increasingly common. This speculative demand increases competition for available units, attracts buyers who are not seeking housing for their own use, and pushes prices higher than what would be expected from residential demand alone.
Short-term rentals fit into this dynamic. Malta has more than 9,000 active short-let listings, a high figure relative to the size of the island and its housing stock. If one assumes a total dwelling stock of about 300,000 units, these short-lets account for slightly more than 3 percent of all properties. In a small, supply-constrained market, diverting this share of housing toward tourism reduces availability for long-term residents and increases the intensity of competition for the remaining units.
The Central Bank’s original estimate was built on a housing model that links the amount of occupied housing stock to long-run real house prices. In that model, increasing the stock of occupied dwellings by 1 percent reduces real house prices by about 1.3 percent. When the Bank examined roughly 4,000 whole-apartment short-lets, it calculated that these units represented around 2.5 percent of the occupied housing stock at the time. Feeding this share into the model produced a long-run price reduction of 2.8 percent if those apartments were shifted back to residential use.
To update the figure for today, the same logic is applied to a larger short-let pool. With more than 9,000 active listings and an estimated national stock of about 300,000 dwellings, the assumed share of units that could return to long-term use is just over 3 percent. Using the Central Bank’s own ratio between changes in stock and changes in price, this larger share translates into a long-run impact in the region of 3 to 5 percent. Under current price levels and the current housing stock, a 4 percent adjustment equates to a difference of around €16,500 on an average apartment.
The reduction may seem small relative to the scale of recent increases, but it is not insignificant. In a market where asking prices rose by €40,000 in one year, removing €16,000 of pressure is a meaningful adjustment. Returning several thousand units to the long-term market would also ease competition, slow the pace of annual price growth, and improve the position of first-time buyers whose affordability is determined at the margin.
This estimate, however, is conservative. The Central Bank model treats the change as a one-off stock adjustment and does not capture broader behavioural effects. If short-term rentals become less attractive or less profitable, speculative buying may decline, fewer investors may seek additional units, and expectations of continuous appreciation may weaken. These shifts can have a larger cumulative impact on prices than the initial stock effect alone. The model also applies the result uniformly across the country, even though some localities have far higher short-let density than others. In those areas, the real impact would be greater than the national average.
Short-lets are therefore part of the affordability equation, but they are not the dominant force. The main driver of rising prices is speculative demand, which places first-time buyers and young families in direct competition with investment-motivated purchasers. Short-lets intensify this dynamic by reducing available supply, but the underlying imbalance arises from households with substantial accumulated wealth bidding against younger entrants whose incomes have not kept pace with the market.
An Airbnb Ban and reducing similar short-lets would help ease some of the pressure, particularly in high-density areas, and would make more units available to residents. But meaningful improvement in affordability requires confronting the broader speculative environment that drives prices upward. Unless policy shifts toward reducing investment-driven demand and prioritising residential use, younger households will remain at a structural disadvantage compared with older generations who accumulated property during periods of lower prices and easier access.
Malta’s challenge is not simply that prices are rising, but that the distribution of market power has tilted sharply toward those with existing wealth. Bringing short-lets under control is one step, but restoring a fairer path to homeownership requires a broader policy focus on limiting speculative pressures and ensuring that housing remains accessible to the people who need it, not only those who can treat it as an investment asset.
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