Young people looking to buy put pressure on property prices

Young people no longer content to rent are putting upward pressure on property prices, a study by the Economic and Social Research Institute has found.

Since the property crash in 2007, falling rents had seen young people establishing independent households at an earlier age than before. The ESRI also found women tended to leave the parental home earlier than men.

However, with house prices rising again, more young people, particularly those aged between 25 and 35, want to buy a home.

One of the study’s authors, David Byrne, said research suggested that 2.6% of those who would have been content to rent, would probably prefer to buy.

“This is contributing to the upward pressure on house prices,” he said.

However, fewer than 8,500 new houses were completed during each of the last two years, the lowest since the 1970s.

Lower rents resulted in 2.3% more 25- to 29-year-olds forming households in 2011, with a 2.1% increase among 30- to 34-year-olds.

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

The ESRI’s Spring Commentary estimated that between 19,000 and 33,000 additional dwellings a year would be needed. However, there are concerns about the willingness and ability of the financial system to fund the building sector to produce dwellings.

While another effect of the rise in rents will be to delay individuals setting up their own homes, the increase in the number of people aged between 20 and 39 will mean that a substantial supply of additional houses will be needed over the coming decade.

“Until the supply of dwellings responds to the rise in prices and rents, there will continue to be upward pressure on prices,” the report warns.

It also warns that, if housing supply does not respond, rents will continue to increase, discouraging more people aged under 35 years from setting up independent households.

Data from the Central Statistics Office’s Quarterly National Household Survey for 2001 to 2011 was used by the authors.

The research is part of an ongoing programme focussing on the residential property market. It is jointly funded by the National Asset Management Agency and Irish Banking Federation.


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