Most homeowners don’t know how much their house cost
Almost 30 per cent underestimate purchase price by between €30,000 and €120,000
New research published by the Central Bank indicates that a lot of Irish homeowners do not correctly remember how much their home cost. Photograph: Getty Images/Stock.
It may be the single biggest purchase in their lives but most Irish homeowners have less than total recall when it comes to remembering just how much they paid for their homes, according to new research published by the Central Bank.
More than 60 per cent of those surveyed claimed to have paid substantially less for their homes than they actually did with most of those questioned getting the purchase price wrong by tens of thousands of euro.
More than 20 per cent of those polled underestimated the price they paid for their home by up to €30,000 while closer to 30 per cent were out by between €30,000 and €120,000.
Volatility in the housing market during the boom and bust years was given as one of the key reasons people got it so wrong but researchers also suggested that substantial errors were being subconsciously made to help people minimise the impact the property crash had on their sense of financial well-being.
The Central Bank paper was co-authored by Yovonne McCarthy and Kieran McQuinn and it found that most transactions included in the survey took place after 2000 suggesting that a long passage of time is not the main reason why most people get it wrong.
younger people have much better recall of the actual purchase price than an older cohort regardless of when the house was bought while those with a higher than average income or a third level education are also less error prone. The more the house cost, the great the discrepancy between the real and recalled price.
“Perhaps people are trying to reassure themselves that their losses as a result of the property crash are not as great as they are,” Mr McQuinn told The Irish Times. “We can’t really say that with 100 per cent certainty but given the scale of the negative equity involved in many of the homes, it certainly looks that way.”
Mr McQuinn said the research paper raised a lot of eyebrows in the Central Bank when details were released internally “but even here when people started to t really think about it, many struggled to say exactly how much their homes cost them”.
The research also assesses the implications of the false memories on the wider economy and says they could be responsible for skewing research in other areas as well as having a negative impact on the overall economy.
The wealth affect of which is derived from owning property is widely recognised and if people believe their homes are worth less than they because they started from a lower base than is actually the case, they are likely to spend less in other areas - up to 70 per cent less, according to the research. “If I think the value of my house is less than what it is then it is going to have an impact on my consumption,” said Mr McQuinn.