Collapse in young home ownership rates will leave future retirees financially exposed, study finds

Home ownership rates among young working adults in Ireland have collapsed in the face of rising house prices, according to a new report, which warns that a greater proportion of future retirees are likely to be financially exposed when they stop working as they will have to pay rent.

The research by the Economic and Social Research Institute (ESRI) found that the share of 25-34 year olds who own their own home more than halved between 2004 and 2019, falling from 60 per cent to just 27 per cent.

Lower home ownership rates would mean a higher proportion of households in the rental sector and “the continuation of rental payments into retirement”, the report says. Reductions in home ownership of this magnitude would also raise the proportion of older people (aged 65-plus) living in income poverty, from 14 per cent at present to as high as 31 per cent.

The findings come on the back of another two-year surge in house prices triggered by pandemic-related factors such as remote working and increased savings combined with ongoing supply shortages.

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The research, funded by the Pensions Council, used data from the ESRI’s Survey on Income and Living Conditions and the Irish Longitudinal Study on Ageing to simulate future rates of home ownership and the potential impact on income poverty rates in retirement. It states that future cohorts of retirees are likely to have substantially lower rates of home ownership than current retirees.

It estimated that 65 per cent of those currently aged 35-44 are likely to become homeowners by retirement given current trends, compared to 90 per cent of those currently aged over 65 and 80 per cent for those currently aged 55-64 and 45-54.

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Age and lifecycle

The simulated rate of home ownership is lower again for the youngest age group, 25-34, with approximately one in two households likely to become homeowners. There is greater uncertainty over the 25-34 age group, the report said, given their age and lifecycle earnings prospects.

The study said that while further income-based supports or direct housing cost interventions for future groups of retirees most at risk of income poverty could be considered by government, this would place a significant cost burden on the exchequer given the scale of the projected fall in home ownership.

It said policy interventions at earlier stages of the lifecycle were critical to help lower the costs of housing that future cohorts would face in retirement.

“Home ownership in retirement currently provides a double dividend – lower housing costs and higher assets in retirement,” the report’s lead author Rachel Slaymaker said.

“Our findings suggest that home ownership rates will be substantially lower for future cohorts, particularly those currently aged 45 and under,” she said.

“Without intervention, this will lead to significantly higher rates of income poverty in retirement for these cohorts,” she added.

Responding to the report’s findings, Karen Gallagher, head of proposition at insurer Royal London Ireland, said: “Home ownership in Ireland has become an increasingly difficult attainment over the years and, unfortunately, the myriad of issues impeding home purchase look unlikely to be resolved in the short-to-medium term.

“Even for those who do manage to get some footing on the property ladder, the point at which they own their home outright and are mortgage-free, has moved further and further away.”