'Til Equity Do Us Part

Falling house prices mean fewer divorces, according to research

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Falling house prices may result in falling rates of divorce, new data from Savills Research has shown. The slowdown in the economy has put pressure on many households, though struggling couples may choose not to divorce because they will have less equity in their property to share upon separation.

Analysis of property market fluctuations and divorce rates shows a remarkably strong correlation between house prices and the number of divorces in England and Wales. Over the past 10 years, a peak in the rates of house price growth has been followed by a rise in the number of divorces, with the reverse also true.

According to Lucian Cook, director of Savills Research, "As house prices rise, home owners undoubtedly feel wealthier and our supposition is that they also feel able to afford to get divorced. We forecast that the current falls in property prices - unwelcome and uncomfortable for the majority - will result in fewer divorces, even allowing for the overriding downward trend in the UK's divorce rate."

Overall, divorce accounts for around 6% of all house sales in the prime property market, though significantly more house sales are attributable to divorce, in higher price brackets.

Outside London, divorce accounts for just 5% of sales of prime housing worth less than £500k, rising to an average 13% in the £1-2million price range. By contrast, in the £2million to £4million bracket, marriage breakdowns account for an average of around 18% of sales across the UK, rising to a quarter in the South East of England.

"At the lower end of the market it is often easier for one party to buy out the other, whilst at the top end there is more equity at stake," says Cook.

The research also suggests that the upward trend in the age at which people now divorce has resulted in a significant variation between the number of divorce-related sales in London and in the country.

Cook again, "With a steady increase in the number of people divorcing in their fifties, it is perhaps more likely that a divorce sale will occur when the couple have moved out of London.

The proportion of divorce sales of prime property in the South East commuter belt is around 10%, but is at its lowest in London at just 3%."

August 6, 2008