We need banks to be conservative, especially in the present situation. But do we want that? What would that mean? i have expressed some concern about house prices in a few place… See here, here and here as examples.
But that implies that for mortgages we need to have them not issue jumbo mortgages, the old 80% LTV based on 3 times one salary and half another rubric comes back. So if we have a combined mortgage allowable on that of 80k, and we want to allow that to service at most 80% of the value of the home, then we have a home value of 1.25*80k.
Average Dublin house prices are estimated at about €350k, those outside Dublin at around half that.
Right now based on CSO data that would imply the following. Remember, households are what we are concerned with. The latest county data are for 2011.
Feel free to compare your county average house price to the table below. Bear in mind that wages are unlikely to come roaring back. Then think if you really want house prices to rise or to fall…
Note :
| 2011 Household income [1][2] | 2014 estimate | 3 + 1/2 | 80% LTV implies | |
| State | €23,980 | €23,500 | €82,491 | €103,114 |
| Border, Midland and Western | €21,013 | €20,593 | €72,285 | €90,356 |
| Border | €20,324 | €19,918 | €69,915 | €87,393 |
| Cavan | €20,144 | €19,741 | €69,295 | €86,619 |
| Donegal | €18,574 | €18,203 | €63,895 | €79,868 |
| Leitrim | €21,059 | €20,638 | €72,443 | €90,554 |
| Louth | €22,063 | €21,622 | €75,897 | €94,871 |
| Monaghan | €19,520 | €19,130 | €67,149 | €83,936 |
| Sligo | €21,955 | €21,516 | €75,525 | €94,407 |
| Midland | €21,121 | €20,699 | €72,656 | €90,820 |
| Laois | €21,644 | €21,211 | €74,455 | €93,069 |
| Longford | €20,033 | €19,632 | €68,914 | €86,142 |
| Offaly | €20,263 | €19,858 | €69,705 | €87,131 |
| Westmeath | €21,889 | €21,451 | €75,298 | €94,123 |
| West | €21,742 | €21,307 | €74,792 | €93,491 |
| Mayo | €21,010 | €20,590 | €72,274 | €90,343 |
| Roscommon | €19,822 | €19,426 | €68,188 | €85,235 |
| Southern and Eastern | €25,082 | €24,580 | €86,282 | €107,853 |
| Dublin | €28,129 | €27,566 | €96,764 | €120,955 |
| Kildare | €25,693 | €25,179 | €88,384 | €110,480 |
| Meath | €23,685 | €23,211 | €81,476 | €101,846 |
| Wicklow | €24,156 | €23,673 | €83,097 | €103,871 |
| Mid-West | €22,760 | €22,305 | €78,294 | €97,868 |
| Clare | €21,763 | €21,328 | €74,865 | €93,581 |
| North Tipperary | €21,725 | €21,291 | €74,734 | €93,418 |
| South-East | €21,644 | €21,211 | €74,455 | €93,069 |
| Carlow | €21,839 | €21,402 | €75,126 | €93,908 |
| Kilkenny | €20,647 | €20,234 | €71,026 | €88,782 |
| South Tipperary | €22,710 | €22,256 | €78,122 | €97,653 |
| Wexford | €20,870 | €20,453 | €71,793 | €89,741 |
| South-West | €23,526 | €23,055 | €80,929 | €101,162 |
| Mid-East | €24,601 | €24,109 | €84,627 | €105,784 |
| Kerry | €20,382 | €19,974 | €70,114 | €87,643 |
| Cork City and County | €24,408 | €23,920 | €83,964 | €104,954 |
| Galway City and County | €22,614 | €22,162 | €77,792 | €97,240 |
| Limerick City and County | €23,749 | €23,274 | €81,697 | €102,121 |
| Waterford City and County | €22,548 | €22,097 | €77,565 | €96,956 |
Brian M. Lucey 
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Fabulous chart! Thanks man.
Are those household incomes before or after tax?
Also, your chart is not very useful, because it has never been possible for a household on the average income to buy an average house. Traditionally, households on less than average income simply didn’t buy a house at all, those on average income bought cheap houses, and those on better than average incomes bought average houses, leaving the very expensive houses to be bought by the very wealthy.
So, when considering house affordability, you should only include income data for households with average or above-average incomes.
Before tax
Thanks. Since those average incomes are so low, I assume that they include households living on the dole and on the state pension, neither of which are potential house-buying households, so they should not be included in house-affordability calculations.
The really sobering thing about your chart is that, in every single region, including Dublin, household income has fallen since 2011. When inflation and new taxes/charges are factored in, people are getting significantly poorer.
This is a very good piece of analysis. House prices as a multiple of income is something that is conveniently ignored by the vested interests in the media and among main stream economists. Keep up the good work exposing the truth that Dublin housing is still WAY over priced!
The CSO chart referred to labels this data as “Total Income per Person (Euro)”, including those outside the workforce (children etc). Shouldn’t your analysis be confined to the earnings of those in employment?
Why?
Because you refer to the 3.5 times income rule? While banks will have to have regard to children for repayment purposes, they aren’t going to take the income of the household earners and then divide it by earners plus children to calculate mortgage eligibility.
Brian, thank you for your chart. The Government doesn’t care. Their actions are surely evidence that they don’t mind who buys houses as long as prices go up. They have done nothing to prevent cash investors, both Irish and from abroad, buying up a very significant amount of apartments and houses, especially in Dublin. They have failed to introduce rent controls, thereby making long-term renting unrealistic for anybody, especially families. They have failed to provide anything like an adequate amount of social housing. In fact, housing is effectively no longer a right. Direct provision seems to have become the preserve of the very poor and problem groups. The Government doesn’t care because most homeowners don’t really care. Many people, even in Dublin their late 40’s or older bought a place to live with just one salary. It may not have been a mansion but it was possible. In fact, quite a few raised a family and bought a place on just one salary. That’s now impossible without substantial parental support. It’s invariably wealthier people who can afford to do so. This is in addition to their frequently subsidizing their adult children beyond the age of life expectancy for most of humanity until the 20th century. How are people who migrate to Dublin supposed to save up enough to buy a place? What are ordiny young people, whose parents aren’t sufficiently wealthy, supposed to do? The answer apparently is to rent indefinitely in expensive and unsuitable accommodation. The homeless crisis is only the tip of the lack of sustainably affordable housing crisis. Presumably the children of the political class aren’t going to have to worry about this. I voted for Labour in the last election. It’s embarrassing to see a Labour Minister for Housing defending the interests of the very wealthy. As far as I can see, nothing is going to change. The solutions are simple enough but the politicians, who sip real Ballygowan water, invariably side with the rich. For example, I read that 87% of housing in Vienna, (hardly a socialist hellhole), is controlled by the State. As far as I can make out, many younger people in Ireland now are effectively worse off than their parents. Am I wrong? What’s the point of a job if someone can’t afford to house themselves? I’m pretty sure their grandparents didn’t subsidize their parents to anything like the same extent. Surely, neither a society nor an economy can continue to prosper in the current situation. I hope I’m wrong but the Government’s action or lack thereof in tackling upward only rent reviews and mortgage debt is surely further evidence that this Government protects wealth and privilege at all costs. The people who caused the crisis are grand for the most part. The people who suffered are not. Thank you for trying your best to be an honest broker in all this. I notice that the soft landing school of economists and commentariat that assured us that there wasn’t a bubble before are at it all again. I also notice that they all still have their jobs.
Brian’s chart calls it “household income”, not “income per person”. Big difference. Which is it, please?