New ESRI Research Examines the Relationship Between Young People, House Prices and Rents

A Research Note, published today (Wednesday, 30th July) by the ESRI, examines the factors which lead young Irish people (between ages 20 and 39) to form an independent household and which also determine whether they choose to rent or to buy. A wide range of factors affect the timing of an individual's decision to set up an independent household including: education, gender, whether they are immigrants and the cost of housing. Income is significant in the decision to move out from the family home and women tend to leave the parental home earlier than men. Since the property crash, falling rents saw individuals setting up an independent household at an earlier age than before. In particular, the results indicate that lower rents resulted in 2.3 per cent more 25-29 year olds forming households in 2011 than would have been the case before the crisis, with a 2.1 per cent increase among 30-34 year olds. Rents have begun to rise again and, if this continues, it is likely that in the future young Irish people will be more likely to share accommodation, or to remain living at home for longer. Commenting on the Note, David Byrne, one of the authors, said:  "When house prices increase, people often expect them to continue rising, providing an incentive to own instead of renting. After 2008, house prices fell considerably and so young people had an incentive to rent." He continued " Rent fell after the property crash, meaning young people could afford to move out and rent, often sharing accommodation. This is a change from what Irish people traditionally did. Rent has started to increase since, meaning people will likely remain at home longer." "Price expectations have begun to rise again, particularly in the Dublin area: as a result, the model would suggest that 2.6 per cent of those who would have been content to rent, would probably now prefer to buy. This is contributing to the upward pressure on house prices." For further information on the research please contact:

Notes for Editors:

• Household Formation and Tenure Choice, by David Byrne, David Duffy and John FitzGerald (ESRI) will be published online on our website on Wednesday 30/07/2014.
• This article will be published as a Research Note in the Quarterly Economic Commentary, Summer 2014 to be published in August.
• This Research Note provides a non-technical summary of a forthcoming ESRI Working Paper titled “Household Formation and Tenure Choice: Did the great Irish housing bust alter consumer behaviour?”
• In an earlier research article published in the Spring Quarterly Economic Commentary, the authors considered how changes in the demographics of Ireland affect the need for additional dwellings over the coming decade. The results suggested that between 19,000 and 33,000 additional dwellings would be needed per year, depending on scenarios for population growth and migration.
• This research is part of an on-going research programme focussing on the residential property market, jointly funded by NAMA and the IBF.