The unaffordability index of Irish housing

This picture speaks a thousand words and in many cases tens of thousands of earnings that a person would have to have in order to afford an average home in different parts of the country. We used recent data from the Daft report and then broke it down into borrowings and compared that to average wages.

20016-09-14 unaffordability tableThe column after ‘county’ is the average price in that region. If we assume a first time buyer will typically want a 90% mortgage we then look at the amount of earnings they’d need to have in order to get the loan.

The last column is where the real story lies, it compares prices in the area to average wages taken from the CSO.

Anything in a white cell with a minus is very affordable, anything in black means you’d have to be earning above average wage to buy a property in the area.

If the cell has a red background that is showing you where the difference is greater than €10,000.

It’s fairly clear that cities and in some cases commuter counties are where the problems are most acute. The biggest outlier is South Dublin County where you’d have to be earning about €100,000 over average wage!

The next chart makes it clearer, South Dublin is unaffordable generally, in North Dublin you’d need about twice average wage to buy a home (which you can often do when two people go for a loan together). Wicklow is an outlier but restrictive planning and proximity to Dublin have a role in prices there.

When viewed through the lens of being a fairly typical first time buyer it paints a very different picture of why rising rents are so difficult for many prospective home-owners to deal with, saving up is hard and upward wage demands in order to buy a home when property is unaffordable is a natural reaction for people working.

2016-09 unaffordability index of housing in descending orderObviously the answer is to get the cost and price of housing down, but so many constituencies are served by higher prices, then there is the issue of what falling house prices might do to the wider economy – so best case solution is we find a way to get house prices to stand still.

Odds of that happening? None.

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