Dubliners spend 55% of take-home pay on rent

Rent-to-income ratio at new high in Dublin, with Limerick the cheapest urban area

Financial experts recommend that a person keeps their housing costs to 30%  of their net income

Financial experts recommend that a person keeps their housing costs to 30% of their net income

 

Dublin city dwellers are now spending as much as 55 per cent of their take-home pay on rent, new figures show. Limerick city, on the other hand, is the cheapest urban place to rent in, with dwellers giving up just 30 per cent of their after-tax income on their home.

Figures from Sherry FitzGerald, Ireland’s biggest residential estate agent, show just how expensive it has become to rent in the capital, particularly given that rental growth has far outpaced earnings growth, with tenants now experiencing a “severe burden” on their incomes.

Since the end of 2012 the rent-to-income ratio, or the amount of the average income that goes on rent, has been rising steadily and touched 55 per cent for the first time in the second quarter of this year.

This means that for every €100 in after-tax income earned, €55 goes on rent. So a single person on a salary of €35,000, will have take-home income of €2,405 a month, of which €1,322 will go on rent.

Typically, financial experts recommend that a person keeps their housing costs to 30 per cent of their net income. When housing costs go above this level it starts to impact on a household’s ability to save and cover other costs.

New high

In 2008, as the Celtic Tiger bid farewell, Dublin dwellers were spending about 53 per cent of their disposable income on rent, in excess of the national average of about 40 per cent. However, the ratio tapered thereafter, but has been rising steadily since 2012. The latest figure represents a new high.

“Capital cities are typically unaffordable for those on average incomes,” said Marian Finnegan, chief economist with Sherry FitzGerald, but added that the “very high figure” in Dublin does reflect how much of a crisis the market is in.

Its level is also far in excess of what someone can expect to pay outside of Dublin. Limerick city, for example, remains the cheapest urban area in Ireland with rent typically accounting for just 30 per cent of a person’s disposable income, followed by Cork city at 37 per cent, and Galway city at 41 per cent.

Areas within commuting distance of the capital also exert a higher burden on a person’s income, with Wicklow at 42 per cent.

New highs

The latest survey from Daft.ie shows that rents have rocketed to new highs in Dublin, with city centre average rents of €1,741 a month, although Ms Finnegan noted that the new rent caps were helping to stabilise the market. However, rent caps are at 4 per cent, which exceeds inflation in earnings.

It is also considerably more expensive to rent than buy. Figures from the DKM/EBS Affordability index show that a couple in Dublin can expect to spend 29.2 per cent on their mortgage repayments, or 36 per cent for a single person looking to buy in Fingal.