Opinion: The desire for homeownership is a complex interplay of historical, cultural, economic, and social factors in Ireland
When Ireland was under British rule much of the land in Ireland was owned by wealthy English landlords. This historical dynamic certainly contributed to the desire for land ownership among the Irish population. Owning land and a home represented not only economic stability but also a form of independence from control of landlords. Hence, homeownership became intertwined with notions of national identity, self-sufficiency, and economic empowerment for many Irish people. There is logic to this, but things change.
Previously, homeownership in Ireland came from passing down property through generations, and homeownership often symbolised the preservation and continuation of family heritage and legacy. This culture has declined in recent times. However, owning your home is still considered a significant milestone and a traditional aspiration, seen as a symbol of wealth, maturity, stability, and social status, leading many individuals to prioritise homeownership as they progress through life stages, sometimes even when it does not make economic sense for an individual or couple.
Historically, Ireland has experienced periods of economic instability, and owning a home has been viewed by some as a form of long-term financial security, as property values tend to appreciate over time. But the boom followed by the 2008 crash taught us that this stability and value appreciation in property is not guaranteed anymore.
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From RTÉ News, Ireland's home ownership age gap among highest in Western Europe - ESRI
We can start by considering the cost of the mortgage. If you take out a mortgage for €270,000 and pay mortgage interest of 4% over 30 years, by the end of the loan period you will have repaid €450,000. To break it down, you would repay approximately €1,200 a month, multiplied by 12 months a year, multiplied by 30 years. Of course, mortgage interest rates also go up and down over time.
Then you have the cost of maintaining your home. Let's say an average of €5,000 a year which is €150,000 over 30 years (in 2019, an AA report estimated the annual average cost of maintaining a home in Ireland at over €17,000). This annual €5,000 is to cover property taxes, insurance, appliance upgrades, general maintenance, and repairs (this is, in my eyes, understated). I have not factored in legal fees, stamp duty fees, etc. After 30 years, you will have worked hard to spend €600,000 of your after-tax money on your home.
Read more: What are the roots of the Irish obsession with property?
But in 30 years, if you are lucky, this house might have appreciated from the original purchase price to a generous €400,000, bearing in mind that there are no guarantees that property values will rise. Hence, it is a risk. And if you're not going to sell your house and move after three decades of living there, it's not a liquid asset. To summarise, in this example, you have paid an extra €200,000 more than what your house is worth. Yes, there are government incentives such as the rent-a-room relief (an incentive that makes economic sense for certain groups) but I am not going to discuss that here.
Let's turn it around: if you rent a place for €1,000 a month, at €12,000 a year, over 30 years that is €360,000. Many people might think, 'what a waste!'. But if you consider the example above, after 30 years you have a (non-liquid) asset worth €400,000 that you spent €600,000 on. Of course, there are issues with Ireland's private rental sector which are relevant to this decision, too.
Read more: Are landlords really fleeing the Irish housing market?
€600,000 (what you have spent on owning a house) less €360,000 (what you would hypothetically spend on rent) is €240,000. So, you would still have another €240,000 after-tax money to play with. To get that €240,000 after-tax money, you would have to earn €400,000 (assuming a 40% tax rate). If you put that €400,000 split annually over the 30 years into your pension, then you will have a pension asset of €400,000. This is a more liquid asset than the above property. Plus, when you pay into your pension it's deducted before the 40% tax.
Some might say that owning a house gives you a sense of pride that you are contributing to the economy thanks to the taxes you pay (eg Local Property Tax). However, with renting, you pay money to a landlord who should pay tax on this rental income, hence, also contributing to the economy. Also, if you put your extra money into a pension like the above example you are preparing yourself for retirement which, again, is a huge help to the economy. Additionally, it is a liquid asset for you when you retire.
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From RTÉ Radio 1's Morning Ireland, Housing among biggest issues facing 'despondent' young people - study
Owning a home is deeply ingrained in Irish culture, but it is crucial to understand why it it might matters to you to go down that route. Ask yourself if it truly adds personal or financial value. Feeling pressured to own by a certain age does not define success. While owning a home offers certain stability, it is essential to grasp the full picture of its financial commitments. Perhaps, if more people truly understood the nuances, fewer would feel compelled to pursue it. Take a moment to reflect: is homeownership the right investment for you, and why does it matter?
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The views expressed here are those of the author and do not represent or reflect the views of RTÉ
