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Who wants to be a millionaire? Well in Ireland, where household net wealth is at a record high, one in eight households already is. On paper, at least.
According to new central bank data that delves into how wealth is shared out across the nation of 5.1mn people, 12 per cent of households have net wealth of €1mn or more, compared with just 5 per cent in 2013, when Ireland emerged from recession.
Indeed, Ireland’s households have amassed record net wealth of more than €1tn — a combined nest egg that has grown by €544bn in under a decade, according to provisional distributional wealth accounts data. The Irish are avid savers, socking away almost a fifth of their incomes — higher than almost any other country in Europe. But most of their riches are down to the value of their property.
And therein lies the problem: housing accounts for nearly two-thirds of the increase in wealth for the richest 10 per cent of Irish households, and 80 per cent for those in the middle, according to the central bank. So if you want to get ahead, own a house. But that is easier said than done: prices have rocketed above even the levels seen in the Celtic Tiger boom years of the mid-1990s to the late 2000s, and the problem is intensified by the lack of supply.
Nationwide, rents have also shot up, surging in the third quarter at “by far” their highest quarterly rate since 2005 and up 14.3 per cent in the year to September in Dublin, according to a report by Ronan Lyons for estate agents Daft.ie. Unsurprisingly, more people than ever are homeless: 11,000 relied on emergency shelter in September, charity Focus Ireland says.
Opposition leader Mary Lou McDonald has attracted support for her leftwing Sinn Féin party largely by promising to fix the housing crunch. As she told lawmakers in the Dáil this week: “Very soon, only the very well off will be able to live in our cities.”
Many young people despair of ever being able to rent or buy, and are looking to emigrate.
Out shopping in a well-heeled Dublin suburb, Barney, 69, a retired dentist, admits to being a paper millionaire. He felt he was buying at the wrong time when he took out his mortgage back in 1988. “But compared with today, anytime was the right time,” he says. People like him saw the value of their property soar during the boom times.
By contrast, Megan Brown, a 25-year-old teacher, along with her partner and their 17-month-old son, “have to live with my mam”. They cannot afford to rent, let alone buy in Dublin, where they work. “It’s definitely a generational thing. Maybe one day,” she sighs.
The cost of living crisis, and the prospect of hundreds of lay-offs from Ireland’s high-earning tech sector, are further conspiring to squeeze the wannabe millionaires of the future.
The European Commission this week said that Ireland had “one of the highest [housing] price-to-income ratios in the EU”. Indeed, US consultancy Demographia, which analysed house prices in several international markets relative to incomes, concluded that Dublin had become “severely unaffordable”.
The poorest 50 per cent of Irish households can take comfort from the fact they have become a little richer in the past decade. Shrinking mortgage debt meant the bottom 50 per cent’s share of net wealth rose to 7 per cent of the total, from just 2 per cent in 2013, the central bank said. The richest households’ share fell to 54 per cent, from 60 per cent.
But mortgage costs are rising again and renting, according to the Daft.ie report, can be nearly twice as expensive as buying, even after factoring in higher rates. Progressive taxation means that income inequality is better than in some countries. Ireland’s poorest have a standard of living that is two-thirds higher than the poorest in the UK, according to a Financial Times analysis. But wealth inequality remains huge.
This bolsters Sinn Féin’s prospects. “The increase in wealth has its mirror image in the ‘locked-outness’ of people from the housing market,” said David McWilliams, an economist. “So as one sector gets rich, the other sector gets isolated.”
Or, as Brown says: “I’m never going to be a millionaire unless I win the Lotto.”