€48,000 The cost of running a family home
An AA survey published today puts a figure of €22,000 on the annual cost of owning and maintaining a home for boom-time buyers – but the financial outlay is much higher when all the bills are paid‘I GET, GIVE OR TAKE, it works out at about, with expenses, £140,000 a year and I pay 30.3 per cent tax on that so it is about a net £100,000. And out of that £100,000, I run a home in Dublin, Castlebar and Brussels. I want to tell you something, try it sometime when you have a couple of cars and three homes and a few housekeepers and everything else. . .”
That was the infamous response given by then European commissioner Pádraig Flynn when asked about inflated expenses by Barry O’Halloran, a member of the Late Late Show audience (and now an Irish Times journalist, incidentally) in 1999.
The answer was just one of the things that did for the Fianna Fáil politician whose career went into a tailspin almost as soon as he was driven from the Montrose studio that Friday night. People were outraged that a person on such a salary could play the poor mouth.
Fast forward 13 years and echoes of his comments could be heard in an interview given by Irelands highest-paid university president to a Sunday newspaper earlier this month. Dr Michael Murphy earns €232,000 a year as the head of University College Cork, but he was quoted as saying that people in his position “are as challenged at paying their bills as anyone else”.
He went on to say that he had expected a certain standard of living when he got the job five years ago. “When you take on a job as a university head, you have an anticipation that there will be a certain salary going with it. You will have bought the house, you will have got the mortgage, which will be bigger than the one from, you know . So I can tell you that university heads are as challenged about paying their bills today arising from cutbacks as anybody else.”
Pricewatch knows nothing about the state of Murphy’s finances or the size of his monthly mortgage repayments or other outgoings – and we have no real interest in knowing more – but we do know that when a public servant earns close to a quarter of a million euro each year, be they a politician, a hospital consultant or an academic, they would be as well off saying nothing about their struggles to make ends meet.
But if you are not Pee Flynn or Michael Murphy, how much do you need to run a household in Ireland? Until today, any answer would have been little more than speculative guesswork, but a comprehensive piece of research carried out by AA Home Insurance and published this morning makes it much easier to come up with a meaningful figure. And that figure makes for depressing reading. The AA says the cost of a running a house is up to €22,000 a year, but all told an Irish family will need almost €48,000 after tax to make ends meet (see panel).
The average annual cost of owning and maintaining a home in Ireland, based on today’s house prices, is €15,400, the AA study shows. And that is if you are one of the lucky ones. The negative equity generation, those who bought houses at the height of the boom and paid an average price of €344,000 with a 92 per cent mortgage, have to find about €22,000 after tax, or nearly two thirds of the average wage of €35,765 (which is before tax) every year, to keep things going. And that figure does not include food, clothes, running a car, entertainment or holidays.
The negative equity generation is paying €15,700 in mortgage repayments, more than many of their peers are spending on owning and running their homes combined.
A homeowner who buys a house today at the current average market price of €172,000, meanwhile, is likely to pay in the region of €9,000 on mortgages repayments each year.
“If you’re unfortunate enough to be one of the negative equity generation and your finances are stretched, chances are you’ll know where every penny is going,” says the AA’s Conor Faughnan. “For others where there is less scrutiny on the household budget we’d imagine people will be genuinely shocked at how much they’re spending on their homes each year.”
What, you may ask, is the AA doing trawling our supermarkets looking for the price of cleaning products or wandering the aisles of electrical warehouses to see how much washing machines and flat-screen TVs cost? Don’t they just do cars?
Not really. Over the last couple of years, the company has ramped up its presence in the home market with its home insurance and home emergency response service.