Pricewatch: Irish families need about €50,000 a year to survive

If the average Irish homeowner were to add up all their spending over the course of a year, the chances are they would be pretty shocked by the total.

When all bills including food, mortgage payments, utilities, insurance and motoring costs, phones, entertainment, education and childcare are totted up, the cost of living for a family who bought even a modest home during the boom years could easily top €50,000.

That may seem like an awful lot of money – and we know that an awful lot of families in Ireland live on a lot less than that – but the figure is not outlandish, according to independent figures compiled by this newspaper coupled with the fifth annual cost-of-living survey published this morning by AA Home Insurance.

After dropping for the first time in four years in 2015, the AA figures show the annual cost of owning and maintaining a family home climbing to €16,611, which is about 45 per cent of the current average Irish national wage. The figure is up by just less than 2.5 per cent compared with its index compiled 12 months ago.

But the figure is an average and covers only the costs of keeping a roof over your head. It does not factor in fairly important elements such as food, transport and all the other things that most people would struggle to live without.

The news is even worse for people who bought the notion that investing in property in Ireland was as safe as houses during the boom years. They will need to find more than €5,000 over the next 12 months to cover additional mortgage repayments.

Running a home

To calculate the cost of running a home, the AA looked at mortgage and property tax payments based on the current average property price and it used real-time average prices from multiple providers to work out the cost of everything from broadband to heating to the cost of domestic appliances.

An increase in its baseline cost is largely attributed to a rise in the average price of a second-hand home in Ireland. Over the past 12 months, property values have increased from €205,000 to €215,000 so someone who takes out a 90 per cent mortgage this year is likely to pay €9,847.48 per year and increase of about €500 year-on-year.

Someone who bought a home in 2007 and paid the average price of just over €330,000 pays €5,330 more on their mortgage repayments than those who purchased a similar homes in the third quarter of this year.

“Those who bought property in 2007 are still carrying a huge burden,” Faughnan says. “It is not just that they can find it difficult to move on because of the equity issue; their monthly payments are so high that they would need an extra €10,000 per annum in salary just to be in the same situation as someone who bought their house this year.”

Maintenance, repairs and contingency funds are the second single most expensive bill for Irish householders, according to the AA. The good news is that those costs fell 3 per cent and the AA now estimates that the average homeowner is likely to spend or set aside €1,241 to keep up with wear and tear on their home.

Taking annual average usage figures for a three-bedroom house, the AA estimates that the average homeowner will spend €975 to heat their home this year – down 1.47 per cent and a further €1,082.48 on electricity, a fall of just over 3 per cent.

Property tax and water charges

Among the variables that remain the same as last year are the television licence which costs €160, water charges at €260 (although those charges have been frozen) and an average property tax of €405. Given its business, the AA can be forgiven for including AA Home Membership in its list of costs, which can be bought to cover such outgoings as blocked drains or boiler breakdowns – it comes in at €83.88.

Other costs it factors in are home insurance, which is calculated at about €538, telephone and broadband bills at €515, household appliances at €538.46, household cleaning products at €300.23, and domestic refuse collection at €315. The AA’s figures, while comprehensive, do not include food, clothes, running a car, entertainment or many other expenses considered normal by most people.

As a guide to working out how much extra a typical family of two adults and two children will need to spend over the course of the next 12 months, we used as the standard financial statement that banks ask customers to fill in if they are trying to restructure debts. Among the costs covered are health insurance, transport expenses, food, clothes and grooming, entertainment, childcare, education and mobile phones. So, how are those costs bearing up this year?

Health insurance €2,963

There is a huge number of plans and a huge number of variables when it comes to health insurance. We compared three broadly similar family-friendly plans. Laya Healthcare's Essential Connect Family plan will cost two adults and two children €2,607, while the VHI's Family Plan Level 1 will cost €3,036. A Family Focus plan from Irish Life Health, meanwhile is €3,246. The average comes out at €2,963.

Car €4,613

The average motorist drives 16,000km (9,900 miles) every year and the average price of petrol is €1.29 a litre. Driving the average family car, which does 12.4km per litre (35 miles per gallon), the average Irish driver will spend about €1,664 this year on petrol. It may sound like a lot but it is actually a saving of more than €500 on just four years ago.

Sadly, much of the saving will be wiped out by the spiralling cost of car insurance. While the cost of comprehensive insurance for two adults depends on many factors, notably location, driving history, no-claims bonus and type of car, prices have gone up by at least 50 per cent in the past four years for most people, which means our notional family can expect to have have little change out of €1,200 this year.

The average age of a car in Ireland is more than seven years, so annual motor tax based on engine-size for a 1.6-litre mid-sized, fairly modern car will be €478, while at least €400 will have to be put aside to cover servicing and maintenance. If you spend €10,000 on a car, keep it for five years and then sell it for half the price you paid for it, the annual cost is €1,000, which takes the total running costs to €4,613.

Food €7,800

If the average Irish household spends €150 a week on food, the total bill will come in at just under €8,000 and that doesn’t factor in a Christmas blow-out of any kind.

Social inclusion €4,056

According to expenditure guidelines released by the Insolvency Service of Ireland earlier this year, an adult is allowed €29 a week to cover the cost of “social inclusion”. If we allow just €10 to cover each child each week, the annual spend on social inclusion for a family of four will come to €4,056.

Mobile phones €820

There is a dizzying array of mobile phone packages on offer. The average monthly mobile phone bill in Ireland is about €30, so two adults in a household making the average number of calls and sending the average number of texts will pay €720. We will allow €10 to cover replacement handsets, which takes the annual cost to €820.

Education and childcare €6,700

According to Barnados, the average back-to-school costs for a child in fourth class is €395, while a child in first year will set parents back €775. We will allow a further €500 to cover costs for trips and extra-curricular activities. Assuming our notional household has two children in primary school, the annual education cost climbs to €1,290.

Schools in Ireland are obliged to open for 183 days a year, so if both parents are working, then after-school childcare costs will have to be added to the bill. Our notional family have found themselves a childminder who charges €150 per week for the school year of 36 weeks, which is a total each year of €5,400. Combining that and the education costs, the total spend rises to €6,690.

Clothes/grooming €1,400

Assuming the man in our notional household visits the barber eight times a year and his partner visits the salon once every 10 weeks (plus once for a special occasion), the total cost of hair care alone will reach €800. If the family then spends just €50 a month on clothes, the amount needed rises to €1,400.

When you put it all together that means the average Irish household could easily spend a total of €45,013 over the next 12 months, while those who bought a property at the height of the boom might find themselves spending €50,343. And that is without taking any holidays.