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Wednesday, December 07, 2022

Stark Gap – The average renter’s net worth is far below that of homeowners

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Homeowners’ net worth far exceeds that of rented homes, with renters barely in positive territory, according to new data collected by the Central Statistics Office in its latest Household Finance and Consumption Survey.

The average net worth of households who own their own homes reached approximately €304,000 in 2020, the most recent year for which figures are available.

In contrast, the average rented home was only €5,300 when the value of the loan was subtracted from the value of the property.

The huge difference between the two groups has major implications for housing, pension and healthcare policy and how the government will provide for those who have minimal assets in old age.

In addition, the wealth gap is likely to widen over the past two years as savings rates hit record highs and home prices continue to rise at double-digit rates per year, thereby increasing the value of homeowners’ assets. Thousands have grown.

Even when the value of housing — typically a home’s most valuable asset — is stripped, the disparity remains widespread.

The median home value in Ireland at the time of the CSO survey was €260,000, meaning that landlords owned almost eight times more non-residential property than their renting counterparts.

However, about seven out of 10 Irish households have their own main residence, which means that a substantial part of the population has a stash of wealth.

For homeowners who have mortgages, the average loan-to-value ratio was a little over 45pc, while only 4pc were in negative equity with mortgages exceeding the value of their home.

3 percent of households have some form of financial asset like savings, shares, bonds, investments or pensions. For families that have financial assets, the average price is €13,300.

Most also have debt, with 68pc having either a mortgage, personal loan, overdraft or credit card balance. The average value of Irish home loans was €25,000.

The apparent wealth gap between landlords and renters is even more pronounced when looking at the richest and poorest groups overall.

The wealthiest 10pc had net household assets of more than €788,000, while the bottom 10pc had less than €600.

The CSO said the survey had underestimated the wealth gap, as some households were included in the top 1 pc, meaning that a significant portion of wealth was not occupied in the top tithe.

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