IDEAS home Printed from https://ideas.repec.org/p/esr/wpaper/wp487.html
   My bibliography  Save this paper

Household Formation and Tenure Choice: Did the great Irish housing bust alter consumer behaviour?

Author

Listed:
  • Byrne, David
  • Duffy, David
  • FitzGerald, John

Abstract

This paper analyses the household formation and tenure choice decisions of different age cohorts in the Irish market. We use data covering the years 2001 to 2011, a period which encompasses the boom, bubble and collapse in the Irish housing market. We find that the household formation decision is affected by the rent-to-income ratio while tenure choice depends upon the difference between rent and the user cost of housing, a notional cost of services derived from owning a home. After the crash, the balance of these costs favoured renting, resulting in a decrease in owner occupancy. In addition, we find that falling average rents caused entry to the housing market to become more affordable, and that this was linked to significantly higher household formation rates.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Byrne, David & Duffy, David & FitzGerald, John, 2014. "Household Formation and Tenure Choice: Did the great Irish housing bust alter consumer behaviour?," Papers WP487, Economic and Social Research Institute (ESRI).
  • Handle: RePEc:esr:wpaper:wp487
    as

    Download full text from publisher

    File URL: https://www.esri.ie/pubs/WP487.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. McCarthy, Yvonne & McQuinn, Kieran, 2013. "Credit conditions in a boom and bust property market," Research Technical Papers 08/RT/13, Central Bank of Ireland.
    2. Donald R. Haurin & Stuart S. Rosenthal, 2007. "The Influence of Household Formation on Homeownership Rates Across Time and Race," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 35(4), pages 411-450, December.
    3. Cobb-Clark, Deborah A., 2008. "Leaving Home: What Economics Has to Say about the Living Arrangements of Young Australians," IZA Discussion Papers 3309, Institute of Labor Economics (IZA).
    4. Lydon, Reamonn & O'Hanlon, Niall, 2012. "Housing Equity Withdrawal, Property Bubbles and Consumption," Research Technical Papers 05/RT/12, Central Bank of Ireland.
    5. Maurice J. Roche, 1999. "Irish House Prices - Will the Roof Cave In?," The Economic and Social Review, Economic and Social Studies, vol. 30(4), pages 343-362.
    6. Asberg, Per, 1999. "Housing Decisions of Young Swedish Adults," Journal of Housing Economics, Elsevier, vol. 8(2), pages 116-143, June.
    7. Lee, Kwan Ok & Painter, Gary, 2013. "What happens to household formation in a recession?," Journal of Urban Economics, Elsevier, vol. 76(C), pages 93-109.
    8. Duffy, David & McQuinn, Kieran & Byrne, David & Morley, Ciara, 2014. "Quarterly Economic Commentary, Winter 2014," Forecasting Report, Economic and Social Research Institute (ESRI), number QEC20144, march.
    9. Duffy, David & FitzGerald, John & Timoney, Kevin & Byrne, David, 2014. "Quarterly Economic Commentary, Spring 2014," Forecasting Report, Economic and Social Research Institute (ESRI), number QEC20141, march.
    10. repec:bla:ausecr:v:41:y:2008:i:2:p:160-176 is not listed on IDEAS
    11. Duffy, David & McQuinn, Kieran & Byrne, David & Morley, Ciara, 2015. "Quarterly Economic Commentary, Summer 2015," Forecasting Report, Economic and Social Research Institute (ESRI), number QEC20152, march.
    12. David Duffy, 2010. "Negative Equity in the Irish Housing Market," The Economic and Social Review, Economic and Social Studies, vol. 41(1), pages 109-132.
    13. David Rae & Paul van den Noord, 2006. "Ireland's Housing Boom: What has Driven it and Have Prices Overshot?," OECD Economics Department Working Papers 492, OECD Publishing.
    14. Van de Ven, Wynand P. M. M. & Van Praag, Bernard M. S., 1981. "The demand for deductibles in private health insurance : A probit model with sample selection," Journal of Econometrics, Elsevier, vol. 17(2), pages 229-252, November.
    15. Javier Gardeazabal & Arantza Ugidos, 2004. "More on Identification in Detailed Wage Decompositions," The Review of Economics and Statistics, MIT Press, vol. 86(4), pages 1034-1036, November.
    16. Ortalo-Magne, Francois & Rady, Sven, 1999. "Boom in, bust out: Young households and the housing price cycle," European Economic Review, Elsevier, vol. 43(4-6), pages 755-766, April.
    17. Michelle Norris & Nessa Winston, 2011. "Transforming Irish Home Ownership through Credit Deregulation, Boom and Crunch," International Journal of Housing Policy, Taylor & Francis Journals, vol. 11(1), pages 1-21.
    18. Honohan, Patrick & Donovan, Donal & Gorecki, Paul & Mottiar, Rafique, 2010. "The Irish Banking Crisis: Regulatory and Financial Stability Policy," MPRA Paper 24896, University Library of Munich, Germany.
    19. FitzGerald, John, 2005. "The Irish Housing Stock: Growth in Number of Vacant Dwellings," Quarterly Economic Commentary: Special Articles, Economic and Social Research Institute (ESRI), vol. 2005(1-Spring), pages 1-22.
    20. Dan Andrews & Aida Caldera Sánchez, 2011. "The Evolution of Homeownership Rates in Selected OECD Countries: Demographic and Public Policy Influences," OECD Journal: Economic Studies, OECD Publishing, vol. 2011(1), pages 1-37.
    21. Duffy, David & Byrne, David & FitzGerald, John, 2014. "Alternative Scenarios for New Household Formation in Ireland," Quarterly Economic Commentary: Special Articles, Economic and Social Research Institute (ESRI).
    22. Elish Kelly & Seamus McGuinness & Philip J O’connell & David Haugh & Alberto GonzÁlez Pandiella, 2014. "Transitions In and Out of Unemployment among Young People in the Irish Recession," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 56(4), pages 616-634, December.
    23. John Muellbauer & Anthony Murphy, 2008. "Housing markets and the economy: the assessment," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 24(1), pages 1-33, spring.
    24. Donald R. Haurin & Patric H. Hendershott & Susan M. Wachter, 1996. "Borrowing Constraints and the Tenure Choice of Young Households," NBER Working Papers 5630, National Bureau of Economic Research, Inc.
    25. Seamus McGuinness & Frances McGinnity & Philip J. O'Connell, 2009. "Changing Returns to Education During a Boom? The Case of Ireland," LABOUR, CEIS, vol. 23(s1), pages 197-221, March.
    26. David Duffy, 2007. "The Housing Tenure of Immigrants in Ireland: Some Preliminary Analysis," Papers WP188, Economic and Social Research Institute (ESRI).
    27. Kim McKee, 2012. "Young People, Homeownership and Future Welfare," Housing Studies, Taylor & Francis Journals, vol. 27(6), pages 853-862.
    28. Thomas Conefrey & John Fitz Gerald, 2010. "Managing Housing Bubbles In Regional Economies Under Emu: Ireland And Spain," National Institute Economic Review, National Institute of Economic and Social Research, vol. 211(1), pages 91-108, January.
    29. McQuinn, Kieran & O'Reilly, Gerard, 2006. "Assessing the Role of Income and Interest Rates in Determining House Prices," Research Technical Papers 15/RT/06, Central Bank of Ireland.
    30. Karl E. Case & Robert J. Shiller, 2003. "Is There a Bubble in the Housing Market?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 34(2), pages 299-362.
    31. Kelly, Eilish & McGuinness, Seamus & O'Connell, Philip, 2009. "Benchmarking, Social Partnership and Higher Remuneration: Wage Settling Institutions and the Public-Private Sector Wage Gap in Ireland," The Economic and Social Review, Economic and Social Studies, vol. 40(3), pages 339-370.
    32. Duffy, David & FitzGerald, John & Timoney, Kevin & Byrne, David, 2013. "Quarterly Economic Commentary, Winter 2013," Forecasting Report, Economic and Social Research Institute (ESRI), number QEC20134, march.
    33. Duffy, David & FitzGerald, John & Timoney, Kevin & Byrne, David, 2013. "Quarterly Economic Commentary, Autumn 2013," Forecasting Report, Economic and Social Research Institute (ESRI), number QEC20133, march.
    34. Maurice J. Roche, 1999. "Irish house prices: will the roof fall in?," Economics Department Working Paper Series n890699, Department of Economics, National University of Ireland - Maynooth.
    35. Christian Nygaard, 2011. "International Migration, Housing Demand and Access to Homeownership in the UK," Urban Studies, Urban Studies Journal Limited, vol. 48(11), pages 2211-2229, August.
    36. Ronald L. Oaxaca & Michael R. Ransom, 1999. "Identification in Detailed Wage Decompositions," The Review of Economics and Statistics, MIT Press, vol. 81(1), pages 154-157, February.
    37. Durkan, Joe & Duffy, David & O'Sullivan, Cormac, 2011. "Quarterly Economic Commentary, Autumn 2011," Forecasting Report, Economic and Social Research Institute (ESRI), number QEC20113, march.
    38. Browne, Frank & Conefrey, Thomas & Kennedy, Gerard, 2013. "Understanding Irish house price movements - a user cost of capital approach," Research Technical Papers 04/RT/13, Central Bank of Ireland.
    39. Zhou Yu & Dowell Myers, 2010. "Misleading Comparisons of Homeownership Rates when the Variable Effect of Household Formation Is Ignored: Explaining Rising Homeownership and the Homeownership Gap between Blacks and Asians in the US," Urban Studies, Urban Studies Journal Limited, vol. 47(12), pages 2615-2640, November.
    40. Duffy, David & Timoney, Kevin, 2013. "Quarterly Economic Commentary, Spring 2013," Forecasting Report, Economic and Social Research Institute (ESRI), number QEC20131, march.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Eoin Corrigan, 2019. "The Scale and Impact of the Local Authority Rent Subsidy," The Economic and Social Review, Economic and Social Studies, vol. 50(1), pages 159-211.
    2. Dorothy Watson & Eoin Corrigan, 2019. "Social Housing in the Irish Housing Market," The Economic and Social Review, Economic and Social Studies, vol. 50(1), pages 213-248.
    3. Bergin, Adele & Duffy, David & Foley, Daniel & Garcia Rodriguez, Abian & Lawless, Martina & Mc Inerney, Niall & McQuinn, Kieran, 2016. "Ireland’s Economic Outlook: Perspectives and Policy Challenges," Forecasting Report, Economic and Social Research Institute (ESRI), number EO1 edited by Bergin, Adele & Morgenroth, Edgar & McQuinn, Kieran, march.
    4. Bergin, Adele & Garcia Rodriguez, Abian & Mc Inerney, Niall & Morgenroth, Edgar, 2016. "Baseline: Methodology, Assumptions and Projections," Book Chapters, in: Ireland’s Economic Outlook: Perspectives and Policy Challenges, Economic and Social Research Institute (ESRI).
    5. Byrne, David & Duffy, David & FitzGerald, John, 2014. "Household Formation and Tenure Choice," Research Notes RN2014/2/2, Economic and Social Research Institute (ESRI).
    6. Duffy, David & Foley, Daniel & McQuinn, Kieran & Mc Inerney, Niall, 2016. "An Empirical Assessment of the Macroprudential Measures in the Irish Housing Market," Research Notes RN2016/3/1, Economic and Social Research Institute (ESRI).
    7. Duffy, David & McQuinn, Kieran & Foley, Daniel, 2016. "Quarterly Economic Commentary, Autumn 2016," Forecasting Report, Economic and Social Research Institute (ESRI), number QEC20163, march.
    8. Duffy, David & Foley, Daniel & Mc Inerney, Niall & McQuinn, Kieran, 2016. "Demographic Change, Long-Run Housing Demand and the Related Challenges for the Irish Banking Sector," Book Chapters, in: Ireland’s Economic Outlook: Perspectives and Policy Challenges, Economic and Social Research Institute (ESRI).
    9. Lawless, Martina & Morgenroth, Edgar, 2016. "Opportunities and Risks for Foreign Direct Investment," Book Chapters, in: Ireland’s Economic Outlook: Perspectives and Policy Challenges, Economic and Social Research Institute (ESRI).
    10. Matel Anna, 2021. "Tenure Status in Life Cycle Cohorts in Poland," Real Estate Management and Valuation, Sciendo, vol. 29(3), pages 1-12, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Duffy, David & Mc Inerney, Niall & McQuinn, Kieran, 2015. "Macroprudential Policy in a Recovering Market: Too Much too Soon?," Papers WP500, Economic and Social Research Institute (ESRI).
    2. McQuinn, Kieran, 2014. "Bubble, Bubble Toil and Trouble? An Assessment of the Current State of the Irish Housing Market," Quarterly Economic Commentary: Special Articles, Economic and Social Research Institute (ESRI).
    3. Gerlach-Kristen, Petra & Mc Inerney, Niall, 2014. "The Role of Credit in the Housing Market," Papers WP495, Economic and Social Research Institute (ESRI).
    4. Addison-Smyth, Diarmaid & McQuinn, Kieran & O'Reilly, Gerard, 2009. "Modelling Credit in the Irish Mortgage Market," The Economic and Social Review, Economic and Social Studies, vol. 40(4), pages 371-392.
    5. Morgenroth, Edgar, 2014. "Modelling the Impact of Fundamentals on County Housing Markets in Ireland," MPRA Paper 57665, University Library of Munich, Germany.
    6. Cronin, David & McQuinn, Kieran, 2016. "Credit availability, macroprudential regulations and the house price-to-rent ratio," Journal of Policy Modeling, Elsevier, vol. 38(5), pages 971-984.
    7. Morgenroth, Edgar, 2014. "Projected Population Change and Housing Demand: A County Level Analysis," Research Notes RN2014/2/3, Economic and Social Research Institute (ESRI).
    8. Kennedy, Gerard & McQuinn, Kieran, 2011. "Scenarios for Irish House Prices," Economic Letters 02/EL/11, Central Bank of Ireland.
    9. Keane, Claire & Walsh, John R. & Callan, Tim & Savage, Michael, 2012. "Property Tax in Ireland: Key Choices," Papers EC11, Economic and Social Research Institute (ESRI).
    10. Jie Chen & Zan Yang, 2017. "What do young adults on the edges of homeownership look like in big cities in an emerging economy: Evidence from Shanghai," Urban Studies, Urban Studies Journal Limited, vol. 54(10), pages 2322-2341, August.
    11. Rosés, Joan R., 2011. "Spanish housing markets during the first phase of the rural-urban transition process," IFCS - Working Papers in Economic History.WH wp11-08, Universidad Carlos III de Madrid. Instituto Figuerola.
    12. Lunn, Pete, 2011. "The Role of Decision-Making Biases in Ireland's Banking Crisis," Papers WP389, Economic and Social Research Institute (ESRI).
    13. Rosés, Joan R., 2012. "Housing markets during the rural-urban transition : evidence from early 20th century Spain," IFCS - Working Papers in Economic History.WH wp12-10, Universidad Carlos III de Madrid. Instituto Figuerola.
    14. Honohan, Patrick, 2009. "Resolving Ireland’s Banking Crisis," The Economic and Social Review, Economic and Social Studies, vol. 40(2), pages 207-231.
    15. D'Agostino, Antonello & McQuinn, Kieran & O' Reilly, Gerard, 2008. "Identifying and Forecasting House Price Dynamics in Ireland," Research Technical Papers 3/RT/08, Central Bank of Ireland.
    16. Sebastian Dellepiane Avellaneda & Niamh Hardiman, 2010. "The European Context of Ireland’s Economic Crisis," The Economic and Social Review, Economic and Social Studies, vol. 41(4), pages 473-500.
    17. Honohan, Patrick & Donovan, Donal & Gorecki, Paul & Mottiar, Rafique, 2010. "The Irish Banking Crisis: Regulatory and Financial Stability Policy," MPRA Paper 24896, University Library of Munich, Germany.
    18. McQuinn, Kieran & Addison-Smyth, Diarmaid, 2015. "Assessing the Sustainable Nature of Housing-Related Taxation Receipts: The Case of Ireland," Papers WP503, Economic and Social Research Institute (ESRI).
    19. FitzGerald, John & Bergin, Adele & Conefrey, Thomas & Diffney, Sean & Duffy, David & Kearney, Ide & Lyons, Sean & Malaguzzi Valeri, Laura & Mayor, Karen & Richard S. J. Tol, 2008. "Medium-Term Review 2008-2015, No. 11," Forecasting Report, Economic and Social Research Institute (ESRI), number MTR11, march.
    20. Juan Carmona & Markus Lampe & Joan Rosés, 2017. "Housing affordability during the urban transition in Spain," Economic History Review, Economic History Society, vol. 70(2), pages 632-658, May.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:esr:wpaper:wp487. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sarah Burns (email available below). General contact details of provider: https://edirc.repec.org/data/esriiie.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.