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How much of your income should you actually be spending on rent?

The average cost of renting a home in Ireland stands at over €1,000 per month, according to ...
Newstalk
Newstalk

14.20 10 May 2016


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How much of your income should...

How much of your income should you actually be spending on rent?

Newstalk
Newstalk

14.20 10 May 2016


Share this article


The average cost of renting a home in Ireland stands at over €1,000 per month, according to Daft.ie.

The property website has released its latest quarterly report - which has found the average rent is now €1,006 - this is the first time it's gone over €1,000 since May 2008.

In Dublin, rental inflation since March of last year has gone up by 8.8% - while average rents are now 1.3% higher than the 2008 peak. Rents in the capital are up 8.8% year-on-year, with the biggest increase in Cork, where rents rose by 16%.

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There were fewer properties to rent available at the start of May than any other time on record.

The breakdown

Ronan Lyons, Daft's in-house economist has been analysing Ireland's rent rises which he describes as far from normal or sustainable.

"The rule of thumb about a household's accommodation costs is that their accommodation costs, in the form of rents or mortgage payments, should not be greater than roughly one-third of the household's disposable income," he states.

To afford any average house in Ireland, a household needs to earn €45,000, he says that this "leaves them with roughly €3,000 a month in their after–tax disposable income. This means a household earning €45,000 should not be spending more than €1,000 a month on its rent."

The assistant professor of economics at Trinity College Dublin notes that "an income of €45,000 is in the upper half of the income distribution, in other words, this household is on an above–average income" to afford average rent.

Capital issues

There are massive regional disparities in rental prices while over a quarter of the population lives in the greater Dublin area there currently isn't one house on the market in Dublin available for the national average of €1,006.

"We can see a growing disconnect between household incomes and prevailing rents," Mr Lyons commented.

While general inflation is close to 0% - and wages have recovered slowly - he adds that "it is becoming increasingly difficult, even for those with above–average incomes, to house themselves in or near the capital."


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