Soaring House Prices May Be Locking People Into Marriages, New Research Shows

High and rising house prices can make it more financially beneficial for couples to stay together than to separate, a new study suggests. Nationally, house prices have risen about 38% in the past five years, and this trend is continuing in June. The cost of living crisis and financial stress associated with it are linked to negative outcomes for households, including poor health and wellbeing, greater housing insecurity, and families having to go without essential items. One often-ignored consequence of house prices is their relationship to marriage and divorce.

Key Takeaways:

• Divorce rates in Australia are at historic lows, with the rate of divorce in 2022 being the lowest level since the introduction of no-fault divorce in 1976.
• The 1990s recession was a period of significant financial hardship for households, and divorces rose over that time. The current economic context is different, and the reasons for the current low divorce rate are complex and multifaceted.
• Couples may choose to marry for various reasons, including the expected benefits of marriage, such as financial stability, social support, and emotional companionship.
• The financial implications of divorce can make it more difficult for couples to separate, particularly if they are homeowners and face high costs associated with running separate households.
• Research suggests that housing prices are closely linked to household behaviors and outcomes, including consumer spending, labor supply, and fertility intentions.
• Rising housing prices can encourage couples to remain married due to the higher housing costs they would face if they separated. The high cost of housing can affect couples' decisions to separate.
• Homeowners may benefit from higher house prices in the event of separation, as the asset held by the couple is more valuable and the wealth each partner may be entitled to is greater.
• Unanticipated changes in housing prices, or “shocks,” can lead individuals to reassess their decision to stay married or separate and divorce.
• The Household, Income and Labour Dynamics in Australia (HILDA) survey found that couples who share similar traits, such as the same religion, education level, or place of birth, are more likely to remain married.
• A longer time being married is also linked to couples being less likely to separate, while partners whose parents had divorced are more likely to separate.
• The inclusion of housing price shocks into the analysis indicates that they have a significant effect on the likelihood of divorce, but the effect differs depending on whether the housing price shock is positive or negative.
• For homeowners, lower-than-anticipated housing price growth significantly increases the likelihood of separation, as the cost of lower house prices is more important than the benefit of lower house prices.
• The research suggests that higher-than-expected house price growth may be keeping some people in marriages they'd otherwise leave, but don't, for financial concerns.
• This is more likely to include women with low education levels, low-income households, and older couples, and can have negative consequences, particularly for women.

Statistics:

• Nationally, house prices have risen about 38% in the past five years.
• The rate of divorce in 2022 was the lowest level since the introduction of no-fault divorce in 1976.
• The 1990s recession was a period of significant financial hardship for households, and divorces rose over that time.
• The Household, Income and Labour Dynamics in Australia (HILDA) survey found that couples who share similar traits, such as the same religion, education level, or place of birth, are more likely to remain married.
• A longer time being married is also linked to couples being less likely to separate, while partners whose parents had divorced are more likely to separate.
• The inclusion of housing price shocks into the analysis indicates that they have a significant effect on the likelihood of divorce, but the effect differs depending on whether the housing price shock is positive or negative.

Sources:

• The Conversation (Au and NZ) -- By Stephen Whelan, Associate Professor of Economics, University of Sydney
• https://theconversation.com/soaring-house-prices-may-be-locking-people-into-marriages-new-research-shows-260086
• Australian Research Council as part of DP230101054
• Australian Housing and Urban Research Institute for project 24/PRO/73346
• Australian Research Council as part of DP230100959.