The legalisation of contraception and consequent fall in the birth rate has contributed to the rise in house prices, a new study has concluded.
The study, entitled Condoms and House Prices, predicts that house prices will continue to rise as the birth rate continues to decline.
According to the study's authors, Alan Ahearne of NUI Galway and Robert Martin of the US Federal Reserve Board, the falling birth rate raised the percentage of the population earning incomes relative to the supply of housing and pushed up prices.
The paper is part of a wider ongoing study of the effects of demographics on Irish house prices.
The study finds that the price of housing is 85 per cent higher in 2005 than it would have been had the birth rate not changed and attributes a €128,000 increase in the average price of a house in Ireland to this factor.
With families now having a smaller number of children, parents in Ireland have more income to devote to house purchase.
"This seemingly unrelated policy change has had a major impact on the price of houses in Ireland. The remarkable drop in the birth rate that owed in large part to the legalisation of birth control has resulted in a 'demographic dividend' that has been a major factor in driving up house prices over the past decade," Mr Ahearne said yesterday.
Since 1980 Ireland's birth rate has fallen from over 20 births per thousand of the population to less than 15, as a result of which the share of the population in work has risen from just under 42 per cent to just over 52 per cent.
The sale of contraceptives was legalised subject to doctor's prescription in 1979, while in the 1985 Health (Family Planning) (Amendment) Act this restriction was lifted.
The study also examines the impact of immigration on house prices, and finds that immigration has also boosted prices, but not to the same extent as the falling birth rate.
"This is not through the conventional channel where immigrants boost house prices because of increased demand, but because of greater contribution to economic growth and higher incomes," Mr Ahearne said.
Permanent TSB has predicted house prices will grow this year by 10 per cent.
