Till debt do us part

Or, to put it another way, did you think that rising house process might allow people who have wanted to split ages ago to finally divorce? If you are happy together, maybe this question doesn’t apply to you, but think of others.

What if, far from being happy, you are reading the paper or your tablet, sipping a coffee and sitting across the kitchen table on this Sunday morning from someone you can’t stand, yet have not been able to leave because of the negative equity in the bloody house you both bought a month before your stupid, expensive, over-the-top Celtic tiger wedding with its personalised bloody menus?

That now seems years ago, doesn’t it? And indeed, the wedding was years ago, a bloody lifetime ago, and if it wasn’t for the fact that your stupid starter home collapsed in value, you’d have been out of there years ago.

But the house did collapse in value, and you had to continue servicing the mortgage, and obviously you couldn’t sell because this would have crystallised your losses! This would have meant that you would have been in debt as well as divorced.

Bad enough having made a fatal error marrying in the first place, but the idea that it would cost you to leave him/her was too much for you to bear. So you both stayed together, seething, hating the sight of each other.

This description of familial dysfunction may seem a bit far-fetched, but it isn’t.

Economic fortunes have a massive impact on stability and marriage. In Ireland, 2006 was ”peak wedding year. More people got married at the top of the boom than in any year since the foundation of the state.

Yet these marriages smashed straight into the wall of economic collapse, putting massive strain on relationships.

Still, the Irish divorce rate remained the lowest in Europe. There are only 0.7 divorces per thousand people in Ireland. Catholic Belgians are four times more likely to be divorced than we. French people three times more likely, the British a bit less so. Even in the reasonably observant Catholic Spaniards and Portuguese, divorce is three times more common than in Ireland.

This is at a time when all other indicators of social behaviour, such as the average age of marriage in Ireland (34 for men and 32 for women), is more or less consistent with the rest of the EU. So too is the average age of women having their first child, and anecdotal survey evidence about infidelity suggests we are no more and no less likely to ”play away as other Europeans.

So what explains the divorce anomaly?

Could it be that the fall in house prices (and therefore, wealth) locked people into bad marriages? If so, will the rise in house prices lead to a tsunami of divorces over the coming years?

And if this in turn is true, will divorce rather than new house-building ease the supply bottlenecks in the housing market? (After all, there has to be a silver lining for someone!)

Estate agents in Britain talk about the three Ds as being crucial to housing supply. They are debts, death and divorces. People’s houses are sold when they die; when they have to get cash in order to pay debt; and when they divorce.

If we are living longer (which we are), if the banks in Ireland are exercising forbearance (which they are), implying that people with huge debts have not been forced to sell, and if we aren’t divorcing (which is the case), the housing stock gets stuck and expected supply doesn’t come on stream. It seems fair to say that this is precisely what is happening in Ireland.

We are getting older and living longer. In fact, Irish men in particular are living longer today than at any stage in the history of males on our island. Also, because the banks put many people on interest only and didn’t want a deluge of debt-related sales, there are more people in houses now in default than would be the case in another country. And, finally, because negative equity has been so severe, people are having to stay together.

So what is going to happen now that house prices are rising rapidly, at least in Dublin?

All over the world, the emotional and mental strain placed upon marriages that have lost their spark takes a back seat when a household’s finances are in trouble. As asset prices, particularly property, plummet during recessions, the value of the family home of the once optimistic and bright-eyed couple gets hit hard.

This, coupled with falling wages, higher taxation, and in some cases redundancy, means that a divorce may not be financially viable for the struggling unhappy couple.

What about when things are looking up? As we can see from the chart below, residential property in Dublin has soared in price while the rest of the country lags behind.

But let’s go back to the three Ds. It is not likely that our lifespans will change greatly in the years ahead. But it is highly likely that people who were postponing selling the family home and staying together through gritted teeth will flog soon.

Some may hang on now for another year to get a better price. This might mean that they could actually get out of the marriage with a bit of cash, which would be a bonus. Others might think to themselves that, having stuck it out, they could do another year in emotional limbo if it meant getting a few quid. Others will have had enough.

In the months and years ahead, we should expect to see the Irish divorce rate move up to the European average as property prices rise. This is one of the unintended consequences of economic boom and bust – and now another house price rally.

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