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Rising house prices lift birth rates for homeowners, study shows


04-12-2017

      
Renters have fewer children as they struggle to get on property ladder
  
  
by: Gemma Tetlow, Economics Correspondent
      
The house price bubble before the financial crisis was bad news for renters, and not only because it hit them in the wallet: it affected their fertility, too.
        
Research presented to the annual conference of the Royal Economics Society examined house prices and birth rates in England since the mid-1990s. It showed that rising house prices caused homeowners to have more children — but this was more than offset by a decline in fertility among renters. The research found that a 10 per cent increase in house prices increased the birth rate among homeowners in England by 2.8 per cent but decreased it by 4.9 per cent among renters.

This implies an overall decline in birth rates of 1.3 per cent, or nearly 9,000 fewer births per year.“This may be because the increased wealth of homeowners allows them to start a family, while private renters postpone having kids until they are on the property ladder,” said Cevat Giray Aksoy, principal research economist at the European Bank for Reconstruction and Development and the author of the report.House prices are closely watched by policymakers.

The Bank of England monitors mortgage availability and house price growth carefully to ensure the housing market does not threaten macroeconomic or financial stability.Politicians have become increasingly concerned that high house prices are preventing younger people from buying homes, with several government initiatives having been introduced in recent years to boost home ownership, such as the Help to Buy scheme.Separate analysis presented to the RES on Tuesday examined the range of factors behind the house price rises, with researchers finding that the price growth of the past 40 years cannot be explained by rising demand and looser credit alone.The particularly rapid growth of the late 1980s and mid 2000s also reflected the belief among “exuberant” buyers that prices would keep rising, creating speculative house price bubbles, according to economists at Lancaster University. Brexit 
  
The researchers found that economic factors — population growth, rising incomes and credit availability — were not enough to entirely explain the more than 16-fold increase in house prices that has occurred over the past four decades, according to figures from Nationwide.“Economic fundamentals fail to explain the behaviour of UK regional property prices in the late 1980s and mid-2000s,” said Alisa Yusupova, one of the authors of the paper. “Instead . . . there seem to have been a succession of speculative ‘house price exuberance’ bubbles rippling out from London.”Figures published by the Office for National Statistics on Tuesday showed that house prices in the UK rose by 5.8 per cent over the year to February 2017. The average house price in England and Wales stood at £229,000 in February, compared to £53,000 at the beginning of 1995. However, prices have started to fall in London and the south east of England. The average house price in London fell to £475,000 in February from £479,000 in January. 
      
      
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