House price drop may increase relationship breakdowns

28-11-2008

House price drop may increase relationship breakdowns
Every ten per cent house price drop will cause an extra five per cent of couples to split, according to new analysis.

Analysis from the Institute of Social & Economic Research suggests while couples stick together when house prices rise – as splitting up would mean falling down the property ladder – falling house prices could encourage people to split.

"For a majority of married couples the most important asset of the marriage is the family home. It follows immediately, therefore, that what happens to the value of this asset should be one of the main concerns of couples considering whether to remain married or divorce," a paper by Helmut Rainer and Ian Smith at the University of St Andrews found.

The research also uncovered younger couples are more likely to suffer.

"Younger couples with relatively low income, high household debt, and dependent children are especially vulnerable to the destabilizing effects of negative house price surprises," the duo wrote.

"By contrast, for couples renting houses from the local authority, it is positive house price shocks that matter, and these reduce the probability of partnership dissolution."

The researchers also found the chances of staying together through a house price slump are increased the older the woman in the relationship becomes, the longer the relationship has lasted and the higher the man's wages.

Couples who are married are also more likely to stay together.

From the research, the paper called on policymakers to consider the social effects of decisions such as interest rate changes.

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