House prices are rising and Ireland is having fewer children, this is not a coincidence

WHICH WOULD YOU prefer – a house, or a child? These two options may appear to be unrelated.

But regular readers will know where this is going – property prices have ballooned in such a way in Ireland in recent years that there is now the suspicion that the two have recently become tightly linked.

Essentially, that higher house prices are at least partially responsible for women having less children.

While there has never been an in-depth study of whether this is true in Ireland, recent evidence points to the fact that it is likely something worth looking at.

Research published earlier this year by the Netherlands interdisciplinary demographic institute (NIDI) looked at how the average number of births per woman in the country fell from 1.8 in 2010 to 1.43 in 2022.

In short, it found that approximately 15% of this decline could be directly linked to higher house prices.

The authors of the study found that fertility decreased more strongly in regions with higher house price increases.

While researchers said there could be more factors at play, it gives the strong suggestion that more house prices play a role in fertility.

But why is this important, and why would a similar study be worth doing in Ireland?

Ireland’s plummeting fertility rate

A country’s ‘fertility rate’ refers to the average number of children that are born to a woman over her lifetime, with a rate of 2 meaning a woman would give birth to 2 children.

This then feeds into something else called the ‘replacement level’ – that is, the number of births estimated to be needed to avoid population decline.

This level is generally said to be somewhere around 2.1 – meaning if a country’s fertility rate is below this, all other things being equal, the population would steadily fall.

Ireland previously had an incredibly high fertility rate of 4 around the mid 1960s.

By the mid-90s, this had roughly halved to just under 2 for a variety of reasons – women entering the workforce, greater education, improved access to contraception and so on.

After rising slightly to just under 2.1 between 2008 and 2011, the fertility rate then started steadily dropping.

A brief spike in 2021 aside, it has consistently fallen since, and is now just over 1.5 in 2023.

Putting that in an international context – while previously Ireland’s fertility rate was the highest in the EU for most of the period between 1998 and 2011, it is now barely above the EU average of 1.46.

The average age of first-time mothers is also rising, increasing from 28.2 in 2003 to 31.6 years in 2023.

From an economics standpoint, this is considered bad because it will likely accelerate the imbalance of young workers to retirees.

As covered previously, Ireland’s population is ageing. This means there will be fewer workers and more pensioners.

The implication of this is that a smaller working population will have to cover the tax burden for a variety of services, most notably the state pension.

The CSO has predicted that Ireland’s fertility rate will fall further still to 1.3 in the coming years.

While strong inward migration is predicted in the coming years, it isn’t guaranteed. Without it, Ireland’s population would shrink, with all the possible problems that could bring.

House price link

Now we come to the why – after being relatively stable around the late 2000s, what has caused Ireland’s fertility rate to drop since?

Again, a variety of factors have likely come into play, such as changing social attitudes and rising incomes.

But again, the suspicion is that cost of living pressures, with housing often the biggest expense, are playing an increasingly important role in deciding when – or if – women have children.

The hypothesis is essentially – children are expensive, with estimates that the cost of raising a child from birth until their 21st birthday in Ireland is over €100,000.

Given that, people want to be financially stable before having children if possible and also secure in their home.

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Neither of these is normally the case in Ireland if you are renting, where your net worth is likely to be a tiny fraction compared to someone who owns their own home.

This is borne out in a 2016 English study, which found that a 10% increase in house prices leads to a 2.8% increase in births among owners and a 4.9% decrease in births among renters.

Good news for homeowners maybe – but the average age of first time buyers has steadily risen along with property values, hitting 35 last year.

Given that this is the age at which fertility begins to drop off, it would leave an extremely short window for someone to have children if they were waiting to secure their first home.

Further study needed

Of course, the counter argument is that as people get more educated and richer, the birth rate declines accordingly.

It is possible that rising house prices merely *delay* fertility – while women may have children later, the overall number of children they have may not vary greatly.

But this could also cause knock-on problems, such as greater difficulty in conceiving.

And while a weaker link between house prices and fertility is possible, the Dutch study indicates that the connection is stronger, indicating an inverse relationship between the two factors.

The possible social cost also shouldn’t be forgotten. Economists will naturally worry what an ageing population and lower births mean for the future workforce and funding pensions.

However, at a societal level, it is clearly a bad thing if women want to have children, but feel unable to because of the cost of keeping a roof over their head.

And while the international evidence is not conclusive, it certainly indicates this could be a factor.

Given the surge in Ireland’s house prices and the coincidental overlap with the sharp drop in the country’s fertility rate, a hard look at the issue by a body such as the Economic and Social Research Institute could be merited.

If women are having fewer children, it is something which should be by choice, rather than enforced as another ugly side effect of Ireland’s dysfunctional housing market.