Why should we expect house prices to have any effect on the marriage decision?
Although there are different theoretical microeconomic models that justify the relationship between both variables, the explanation is much more intuitive and simple. Among the series of expenses that marriage entails, housing is one of the essentials because the couple needs a place to live together.
maybe the duo buy house/wedding has faded over time. If decades ago it was considered essential to buy a home before the wedding, today couples handle other options, such as rent.
In addition, the number of marriages has decreased as more couples opt for cohabitation, a decision that does not have the long-term connotations of marriage (and therefore less need for a house). forever).
In a recently published research project financed by the Fundación Ramón Areces, we have studied the impact that variations in house prices in recent years may have had on the life decisions of Spaniards.
In 2008, three successive crises were unleashed (global financial, economic and public debt) that particularly affected Western countries. Experts consider this train of overlapping crises as one of the most severe in history: the great recessionjust below the Great Depression produced by him crack stock market of 1928.
One of its first consequences was the explosion of the real estate bubble, which had been brewing since the previous decade. In Spain, according to the Ministry of Public Works (p.18), in 2012 the decrease in house prices was close to 20%. In addition, the number of evictions and foreclosures skyrocketed to a peak that was four times the pre-crisis figures.
In that period, there were also high unemployment rates (between 2012 and 2014 they were over 25%) and negative growth in Spanish production.
These were consequences visible of the crisis. However, a bad economic situation has more subtle, but also very important, effects on some individual decisions that are crucial for people’s well-being.
Thus, faced with the increase in unemployment, many couples decided to postpone their decisions about marriage, birth or divorce. Economic issues unrelated to the particular situation of families also influence the making of this type of decision.
wedding and house
Regardless of whether the couple chooses marriage or cohabitation, the need for a home introduces its price as a key variable in this decision. Although the percentage of rental homes has increased in recent years, Spain is still mostly a country of owners (according to data from the INE, p.5, in 2020, 76.9% of households owned their home, while 17.3% lived for rent).
On the other hand, the home ownership and rental housing markets are connected as they are two substitute goods: the home that is used as a habitual residence or is rented or purchased. Thus, variations in housing prices are transmitted, to a greater or lesser extent, to rental prices.
In conclusion, rising house prices may end up affecting couples’ marriage decisions, even if they choose to rent.
a negative relationship
In our study we use data both at the provincial level and from the 282 Spanish cities with more than 25,000 inhabitants between 1995 and 2018. The data on the number of marriages come from civil registries, while the price of housing was obtained from statistics. of the Ministry of Development. In addition, we include other variables such as unemployment and inflation rates and the educational level of households.
The main result has been the finding of a negative relationship between marriage and house prices in Spain. That is, when house prices increased marriages decreased and when house prices fell there were more marriages. For illustrative purposes, the following graph shows the evolution of both variables at the national level, highlighting that this negative relationship was more pronounced during the years of the real estate bubble and at the beginning of the great recession.
This result has crucial implications for public policies because there is a strong relationship between the decline in marriages and the decline in the birth rate, which is a very important problem in Spanish society. Facilitating access to marriage could be a way of promoting the birth rate.
One way could be to facilitate access to home ownership for young couples. This could be achieved by increasing the supply of public housing for low-income people or by introducing tax benefits for savings and mortgage loans.
However, the effect of such policies affecting housing demand could be ambiguous: while easier access to the housing market would increase marriages, at the same time an increase in housing demand (by facilitating access to property) could generate, in the short term, an increase in housing prices which, according to our results, would in turn reduce the number of marriages.
A question of balance
Greater state supervision could help balance housing supply and demand and discourage private market monopolies. This issue is especially relevant because, in recent years, new players have appeared in the Spanish real estate market.
Since 2013, and especially since 2017, foreign capital funds have broken into the Spanish real estate market. The management that these private funds are carrying out of their extensive portfolios of real estate assets is somewhat unpopular and, in fact, they are known in public opinion and the media as Vulture funds.
From our perspective, the growing market power of these funds could be generating negative effects on family formation, since the lack of competition would raise housing prices.
In addition to the different supply or demand policies that the public authorities can adopt to facilitate access to housing, they must not neglect the task of supervising the evolution of the real estate market.
Our results reveal that the housing market bubble and subsequent market crash in 2008 had significant consequences on family formation. Therefore, public authorities must try to reduce fluctuations in house prices to prevent similar episodes from recurring. Otherwise, the marriage and birth rates will continue to decline.