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Breaking stories
Entrants to housing market forced to rent rather than buy, says ESRI
By Stephen Rogers
The recession has forced the majority of entrants to rent rather than buy their homes, a survey by the ESRI has shown.
The Government think-tank referred to figures which showed that, between 2006 and 2011, the number of households in Ireland increased by 187,000, or almost 13%, to 1,649,000.It said that even though home ownership has been traditionally high in Ireland, the number of households renting rose by 160,000 during that five-year period.
“Nearly all the net new households formed were renting,” the ESRI said. “This is probably due to a number of factors. For example, the sudden drop experienced by the housing market from 2007 onwards gave rise to the expectation of further house price falls. In addition, affordability has been an issue, initially due to high house price levels. In the current period, affordability would also be affected by income cuts and the need to repay existing debts.”
It said that, due to changes in people’s choice of occupancy, 18.5% of households were in private rented accommodation in 2011 compared to 9.9% in 2006.
“The change is particularly marked in the urban areas,” it said. “For example, the proportion in private rented accommodation in Galway city was 37.5% [up from 24.9% in 2006] and in Dublin City it stood at 32% compared to 19.2% in 2006.
“The effect of the housing crisis on households’ preferences could see a long-term increase in the share of households preferring to rent than to buy.”
However, the ESRI forecast that once the economy recovers and expectations about house prices change, a proportion of those renting will look to buy a home.
“A number of key factors will influence this decision, including the availability of mortgage finance,” it said.
“Given the impact of the crisis on incomes, the ability of households to repay any new mortgage debt will also be an important factor. Finally, the depth and duration of the crisis, in addition to widespread negative equity means it is possible the crisis will have changed the perceived attractiveness of the rental tenure choice.”
Spending rises
* There has been a 56% increase in household expenditure since 2005, according to a report issued by the ESRI and CSO.
The report claims mortgage repayments are the main cause of the massive increase, while most other forms of expenditure fell by an average of 4.3%.
Housing expenditure grew from €94.51 a week between 2004 and 2005, to €147.73 a week between 2009 and 2010.
The biggest drop in expenditure is alcohol and tobacco, which fell 16.3%, from €47.18 a week between 2004 and 2005, to €39.48 a week between 2009 and 2010.
Households are also spending less on food, clothes, footwear and household durable goods.
State transfers have taken the biggest increase in income, rising 73.2%, from €125.41 to €217.20.