Business Property & Mortgages

Tuesday 16 September 2014

Higher rents mean young people can't afford to move out of home - report

Published 30/07/2014 | 02:30

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If you move back in with your parents, you may end up regressing and receiving pep talks from your mother, like Kristen Wiig’s character in ‘Bridesmaids’ (opposite page). Yikes.
If you move back in with your parents, you may end up regressing and receiving pep talks from your mother, like Kristen Wiig’s character in ‘Bridesmaids’ (opposite page). Yikes.
Tenure Choice for those aged 25-29 years
Source: ESRI Research Note on Household Formation and Tenure Choice
Rising rents may encourage younger people to buy
Rising rents may encourage younger people to buy

With rents on the rise again and property prices recovering, more people between the ages of 25 and 29 will end up being forced to stay with their parents longer, even though they would prefer to buy a new home, a report form the Economic and Social Research Institute (ESRI) shows.

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The sharp fall in rents at the start of the housing market collapse made it affordable for those under the age of 30 to rent.

But 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, authors David Byrne, David Duffy and John FitzGerald found.

Crash

Mr Byrne said: "Rents fell after the property crash, so that young people could afford to move out and rent, often sharing accommodation.

"This is a change from what Irish people traditionally did. As rents have started to increase again, young people will likely remain at home longer."

The latest study, called 'Household Formation and Tenure Choice', has found that people make a decision to leave their parents' home if they can afford to rent, or afford to buy.

Those with higher levels of education are more likely to leave their parents' home.

Since the property crash, falling rents have seen individuals setting up independent households at an earlier age than before.

There was a surge in those between the ages of 25 and 34 leaving their parents homes and renting in 2011, the ESRI found.

But rising house prices are also likely to prompt a shift from renting to a preference for buying.

"When house prices increase, people often expect them to continue rising, providing an incentive to own instead of renting," Mr Byrne said.

"Price expectations have begun to rise again, particularly in the Dublin area. The model used in this research suggests that 2.6pc 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."

According to the Central Statistics Office there are around 474,788 people who rent.

This suggests that an extra 12,344 people would now prefer to buy.

And rising property prices will encourage more young people to switch from renting to attempting to buy a home, despite a chronic shortage of homes for sale, the report from the ESRI also added.

Irish Independent

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