How are people affording the house, kids, cars.....

homeOwner

I am constantly amazed at how people are affording to have the nice house, 2.5 kids, 2 new cars, foreign holidays etc... with creche fees or on one income.

While I dont begrudge them their success, good luck to anyone who can afford to live like that comfortably, I just dont understand how they are making ends meet. I have a pretty good job earning way above the average salary you read about in statistics. I have a morgage that I can easily afford but I live in a 2 bed apartment and want to trade up. I know i can go all out and get a reasonable 3 bed semi in the same area but I would be really over stretched and would kiss goodbye holidays, eating out and all luxeries. Not to mention I would be in serious trouble if interest rates were to go through the roof. I have no idea how people are managing it.

There must be an awful lot of people with an awful lot of money around Dublin. Are they all solicitors working on tribunals earning 2K per day? Or there is some sort of tax avoidance sceme that I am not aware of. Surely people arent all maxed out on debt - they simply cant be or am I being naieve?

Any insights?

Einstein

Hi Homeowner
I'm like you in that I have a house and a car, and can just about get by with a few quid to socialise and get groceries.
But remember what happens, you get married. The tax allowance for both partners goes up, meaning you can get a little more money a month, not that it's a whole lot, but it's something!

But to be honest, I honestly reckon most people in this country live far beyond their means and are in constant debt...sound like fun to you?

D..

Kingsize

They Never Abolished Slavery They Just Improved The Packaging

Dellgirl

They Never Abolished Slavery They Just Improved The Packaging

Haha! FAntastic! Can I have that for my sig please?

Bluehair

homeOwner wrote:

Surely people arent all maxed out on debt?

Yup thats exactly what it is. My generation (I'm 30) has only experienced cheaper and easier credit as the years go by. New car? No prob. Holiday? grand. Conservatory? Here's the dosh.

It'll all end badly though I'm convinced of it. The current attitude in Ireland is that the good times can never end so we'll live for today :rolleyes:

homeOwner

I'm same generation so I know what you mean but I also remember my parents struggling in the 80s with high tax and interest rates.

Bluehair wrote:

It'll all end badly though I'm convinced of it.

Yeah I think you're right. Once interest rates go up it is going to hurt.

MorningStar

On the face of it seems like utter maddness. There are a few things to consider. The boom is about 10 years old. Alot of people who have 2 or 3 kids didn't have them in the last year but over this time period. So a lot of the people have houses that are worth a lot more than their mortgages. So while it might mean if they bought the house now the mortgage would mean the family lifestyle needs to be funded by a huge wage the current family there don't need a huge wage.
Some can even afford to remortgage to get the cars or extensions etc.
People also under estimate the luxuries that are common. Buying a premade sandwich is a luxury as is a dvd rental etc.
In saying that some people are at risk. Intrest hikes would be a problem but they speed they can go up now is so limited while a concern it is not a risk in the way it was in 70's and 80's ireland.
Some people in their 30s have 70% equity. While others don't own at all. It depends on when you joined the market and many people forget that. Friends have a huge house in Raheny and their mortgage is one quarter of mine for a smaller house.

Divers wrote:

The tax allowance for both partners goes up, meaning you can get a little more money a month, not that it's a whole lot, but it's something!

AS somebody who got married recently I can assure you that you don't get any extra tax allowances you can share tax allowances but no real differnce. If you have children you do get tax credits and also get childrens allowance but it's not that much as you said.

Einstein

MorningStar wrote:

If you have children you do get tax credits and also get childrens allowance but it's not that much as you said.

i didn't say how much it was, just pointed out that its something

homeOwner

MorningStar wrote:

So while it might mean if they bought the house now the mortgage would mean the family lifestyle needs to be funded by a huge wage the current family there don't need a huge wage.

I think you are right about those people. I work with someone who bought a huge 4 bed house for IR£70K back in early 90s. The house is worth over 400K now and the mortgage is only 50K.

But what about the people trading up. If you sell now, even if you bought before the boom, the property you are buying has gone up equally, so you still need alot of cash saved.

Something is not adding up.

davidoco

Divers wrote:

........you get married. The tax allowance for both partners goes up, meaning you can get a little more money a month, not that it's a whole lot, but it's something!


D..

The tax free allowance (tax credit) does not go up one cent when you get married. Two single people come out the same when they get married.

Before individualisation a couple getting married could look forward to a few extra quid if one earned a lot more than the other, but that was before Charlie Mc starting messing with tax credits.

Kingsize

Haha! FAntastic! Can I have that for my sig please?

why thanks! course you can

davidoco

MorningStar wrote:

..... If you have children you do get tax credits .....

There are NO tax credits for children, not a cent, this government don't want to encourage people to have kids.

What there is, is the Home Carers Credit, which fixes the loophole that individualisation caused in 1999 but it don't make you a penny better off, of course somebody has to be the home carer (not working outside the home) to get the full credit.

The tax system here does not have favour the family. That may be a good thing or a bad thing depending on what side of the fence your on.

MorningStar

Divers wrote:

i didn't say how much it was, just pointed out that its something

I know but I was pointing out it isn't marriage it's children that effect your tax. There is not tax increase for being married my accountant assured me.

homeOwner wrote:

I think you are right about those people. I work with someone who bought a huge 4 bed house for IR£70K back in early 90s. The house is worth over 400K now and the mortgage is only 50K.

But what about the people trading up. If you sell now, even if you bought before the boom, the property you are buying has gone up equally, so you still need alot of cash saved.

Something is not adding up.

Trading up is still very possible. As per your example, €400K house sold left with €350k profit non taxable. Buy a €600k house for a mortgage of €300k. If your wages have increased over the time you could easily afford the bigger mortgage and still have 50% equity. The figures are rough so no point in jumping over them. Property does not go up equally by any strech of the imagination. In three years our first home went up so we went from 20% equity to 51% then bought a house twice the size (literally) having 23% equity and a bigger mortgage. A year and half later we have 37% equity on our current home but if we kept the other house we would have made more cash and a large amount of equity and no the fee on stamp duty.
Some people are borrowing on the equity and buying a second property and renting it out. These investors are belived by some to be the cause of price rises and they also belive these people will suffer tha most in a sudden price drop or intrest rate increase. What some over look is that many have stopped investing in ireland and that after a year or 2 the equity has been increasing so that the market would need to drop by about 40-50% for it to effect them. It's possible but more likely some people will rent for life now IMHO

homeOwner

Tax allowances or credits or whatever should be given for putting your kids in a creche. I dont have any (yet!) but it is crippling some of my friends who have no choice but to pay astranomical creche fees (well technically they do have a choice, they could live in a cheaper location and stay at home but its not much of a choice).

MorningStar

davidoco wrote:

There are NO tax credits for children, not a cent, this government don't want to encourage people to have kids.

What there is, is the Home Carers Credit, which fixes the loophole that individualisation caused in 1999 but it don't make you a penny better off, of course somebody has to be the home carer (not working outside the home) to get the full credit.

The tax system here does not have favour the family. That may be a good thing or a bad thing depending on what side of the fence your on.

I stand corrected about the tax but the reason I don't agree with. Childs allowance is given for kids and children clothes aren't taxed right? That part of the tax system favours children but obviously not enough. The fact one person can have the combined tax allowance for both is also benificial to some families but again not enough and fair for all. THere are also a lot of new employment right for parents that aren't fair for some of us who don't want children.

I don't agree that creche credit should be given as it will just push up prices of creches. I would be more inclined to state run creches and programs to train people to work in them.

SparkyLarks

homeOwner wrote:

Tax allowances or credits or whatever should be given for putting your kids in a creche. I dont have any (yet!) but it is crippling some of my friends who have no choice but to pay astranomical creche fees (well technically they do have a choice, they could live in a cheaper location and stay at home but its not much of a choice).

Not much of a choice, it's a hige choice, do you raise you kids youself or do you go and earn more money to give them a better life, it's not an easy answer.

But you have to bring in something to balance that for people who stay at home. People who stay at home are giving up a second wage to raise their kids.

Otherwise you'll end up with one partner staying at home to run a small private creche being paid by the other partner to avail of a tax break.

Dellgirl

Thanks!

babaduck

Divers wrote:

Hi Homeowner

But remember what happens, you get married. The tax allowance for both partners goes up, meaning you can get a little more money a month, not that it's a whole lot, but it's something!

But to be honest, I honestly reckon most people in this country live far beyond their means and are in constant debt...sound like fun to you?

D..

Sadly untrue for must of us married couples - we're on the same tax band & we get exactly not one cent extra. If one of us was on the lower tax band, or gave up work, then the other would get the extra tax free allowances... not in our case though

I am seriously convinced that a lot of people are living WAAAAYYY beyond their means. We're not flush by any standards, but everything we own except for the house & cars were bought outright - no interest free credit on the furniture or white goods etc. like so many people. We saved like lunatics for our stuff and then upgraded it when we could afford it. Our only loans are the mortgage & car loans (both to be cleared in 18 months).

Einstein

www.revenue.ie wrote:

Personal Circumstances 2005
Single/Widowed without dependant children 29,400 @ 20% Balance @ 42%

Single widowed qualifying for One Parent Family tax Credit 33,400 @ 20% Balance @ 42%

Married Couple one spouse with Income 38,400 @ 20% Balance @ 42%

Married Couple both spouses with Income 38,400 @ 20% with increase of 20,400 max. Balance @ 42%

This shows the difference in annual income. Therefore allowing slighly more net money per month.

davidoco

SparkyLarks wrote:

Otherwise you'll end up with one partner staying at home to run a small private creche being paid by the other partner to avail of a tax break.

If they were to give a tax credit to people who have their kids in a creche I can't see the above happening. Apart from the hassle of registering as a creche etc, the tax relief you get for paying the partner would be wiped out by the partner having to pay tax on that income.

Back to the original topic, for every couple that you see who are seemingly living the good life (house holidays etc) there are probably 20 more just getting by with the average house, one holiday in Ireland etc.

homeOwner

SparkyLarks wrote:

Not much of a choice, it's a hige choice, do you raise you kids youself or do you go and earn more money to give them a better life, it's not an easy answer.
/QUOTE]

I think you misunderstood me. What I meant is that for some people, financially, there is no choice, they need the second income. The only way they can afford to stay at home is to relocate somewhere cheaper and sacrifice living near their support system of friends and family and work etc.... So for them creche is the only choice.

Einstein

Then is the revenue site wrong? Or giving misleading info?

davidoco

Divers wrote:

This shows the difference in annual income. Therefore allowing slighly more net money per month.

That just spells it out even more

Two single persons 29400 x 2 = 58800
Married persons 38400 + 20400 = 58800


Trust me, in 1999 Charlie Mc tried to do married couples out of it, it was an idea to get women back into the workforce. Of course the backlash came and he brought in the Home Carers before the budget took effect.

Think of this one, married couple both aged 55 one working kids raised. They only get a band up to 38400. Married couple with dependent kids up to 58800 band. The 20400 @ 20% is the Home Carers Credit.

Einstein

sigh!

b'stards

SparkyLarks

homeowner I understand you point but ther is always a choice. people can change jobs for ones with less hours, stay at home, find a work from home job, use a creche.
Raising a child will always require sacrifice, be it financial(using a creche) or career( staying at home), or income( combination of the two).

As to wher people get the money, I think if you have a morgage for a few years you repayments still the same but you wages have probably increased. You might have a house worth 300,000 that cost 200,000 so you repayments are around 800 instaead of 1000. You wages may have gone up by 2 or 3 hundred a month net

I don't know of anyone who's just bought a house who has loads of money for holidays ect. If you've just bought a house and that's followed by a child joining you family quickly then you'll definately need the second income, and a creche( or a grandmother, that's what people used to do for years). and things will be very tight

If you've had a house for 5 years before a child joins your family, your morgage payments will be much lower relatively and so you might be able to forgo the second income.

homeOwner

SparkyLarks wrote:

homeowner I understand you point but ther is always a choice.

Yes but in my opinion its a Hobson's choice. ie all the choices are equally undesirable involving enormous sacrifice.

I agree that having kids involves life changes and it is a shame that in this country under the current situation with house prices being too high for a lot of people, high creche costs and salary increases barely keeping up with inflation, people are forced to put their kids in a creche, commute long hours and not have much quality time together to keep a standard of living that is just middle of the road.

MisterAnarchy

This is how people can afford it (or cant )
Debt levels exceed incomes for the first time
Consumers could face serious financial risk if interest rates rise sharply or if they lose their jobs, such is the high level of personal debt in the economy, the Central Bank has warned.

Last year, for the first time to date, Irish people had more debt than they were able to pay back out of their disposable income.

The Central Bank now estimates that personal debt stood at 120 per cent of disposable income at the end of 2004, up from 97 per cent in 2003.

This means that for every €1 of after-tax income last year, people owed €1.20. Ten years ago, before the economic boom, they owed just 48 cents for every €1 in after-tax income.

"In general, the more developed an economy, the higher the ratio is," Mr John Kelly, the deputy head of the bank's statistics department, said yesterday. He was speaking at the publication of the bank's first quarterly bulletin of 2005.

This surge in the ratio of personal debt to disposable income could cause big problems in the future if the pace of growth is maintained, the bank's economists believe.

The bank warned of the "heightened vulnerability" of households to higher interest rates or changes to their job status. Interest rates are currently at a cyclical low, but most commentators expect them to begin rising within the year.

When taken together, all households in the Republic owed €85 billion at the end of September. This was almost six times :eek: higher than in 1995, with the increase attributable to a greater general level of comfort with debt.

Disposable income has, however, grown much more slowly, allowing debt to surpass it for the first time last year. Irish households are now more indebted than most of their European neighbours.

MorningStar

MisterAnarchy

A little slanted on one view. In truth only a a certain section of the population are in that debit. It is more to do with the fact that are population is so young that we have such a large debit. Younger people have to borrow more. It's not to say it isn't a bit scarey.

Many of the people with kids and cars are not in huge debit due their equity. If a property crash truely brough the market down by something like 80-90% there would be a concern.

You made some points very well but economic theory basically says we are doing fine. In european view this is good for us too. It's basically gGermans who are saving the money we are spending. The revenue they are getting form our economy should help them

SparkyLarks

homeOwner wrote:

Yes but in my opinion its a Hobson's choice. ie all the choices are equally undesirable involving enormous sacrifice.

I agree that having kids involves life changes and it is a shame that in this country under the current situation with house prices being too high for a lot of people, high creche costs and salary increases barely keeping up with inflation, people are forced to put their kids in a creche, commute long hours and not have much quality time together to keep a standard of living that is just middle of the road.

Agree 100%.

As for debt levels they are a risk.We might get away with it but intrest rates will rise at some time, 1 year 5 year 10 years?? who knows. The economey can put up weith a certain rise but once things go ad everything will go bad.

If inetrest rates rise to 6 or 8 percent(double your monthly repayments, so you house despite being the same value is now twice as expensive) then people will have to seriously tighten the belt but will probably able to keep making repayments, house prices may will level out.

However if the economey slows down people won't be able . People won;t be able to afford new houses and the price of houses will fall. Then people will hold off buying houses because their prices are falling. Plus a 200,000 euro house would cost the same as a 400000 house cost now to service the mortgage so the cost of a mortgage is rising even though house prices are falling.

It will then become difficult to sell houses so proces will drop even further( a reversal of what is happening now. That will mean there will be less building being done as the price of houses have fallen. Building wages will probably fall too. ect ect.

If people sto being able to make repayments banks will repossess houses, but if they can't sellthem or only get some of the money back from the sale of them the'll raise intrest rates to recoup the losses. making things worse

The high intrest rates will also affect buisnesses many of whom will eith go out of buisness as they are unable to finance their debt, or find investors who would be more cautious. that and the fact that they can get a resonable return from banks due to hgh intrest rates. Overseas investment will relocate, either back home due to down sizing or to lower cost economies. Making things worse.

A bit of a doomsday scinario but unfortunately when things are going wrong everyhting else starts goin wrong.

ther are alot of people living now of debt, which if intrest rates rise will cause them serious trouble

Bluehair

SparkyLarks wrote:

A bit of a doomsday scinario but unfortunately when things are going wrong everyhting else starts goin wrong.

This is precisely the problem and is exactly what many are sticking their heads in the sand about.

Everything is this economy is so tightly linked to construction that even a serious slowdown in new home building will have a bad effect, one that make itself felt throughout the whole economy very quickly.

The problem is that the whole situation currently smacks of being a house of cards. One significant problem and the whole thing will fall down.

dublinguy2004

davidoco wrote:

If they were to give a tax credit to people who have their kids in a creche I can't see the above happening. Apart from the hassle of registering as a creche etc, the tax relief you get for paying the partner would be wiped out by the partner having to pay tax on that income.

Back to the original topic, for every couple that you see who are seemingly living the good life (house holidays etc) there are probably 20 more just getting by with the average house, one holiday in Ireland etc.

It's certainly true about the 20 people propping up the wealthy. It's probably more like 100. People don't really notice the less well off: disabled, homeless, pensioners, prisoners etc. Not to mention the working/'call centre' classes. I guess if you own a scutty flat within 30 minutes of the city you can count yourself lucky these days.

There certainly has been a huge transfer of wealth in terms of property in recent years. Property ownership is now beyond the reach of a large percentage of the population and will be a permanent feature of our society for years to come (in my view). The Irish economy is now at an advanced stage and like other advanced economies, large swathes of the population are tenants; most of whom remain tenants for their entire lives.

It's not all doom and gloom though. I guess if you can land a nice job, you and your partner can be the bank's bitch for 30+ years and you live in suburban bliss for the rest of your lives. The other option really is to take hold of a buoyant economy and make it for yourself. Entrepreneurship is the way forward and there are considerable opportunities for young, enthusiastic Irish people out there that just did not exist in say the 1980s. So in this sense, living in Ireland in twenty 05 is not too bad. Although I'm thinking of moving to pastures greener myself as a native Irish, non-home-owner, 24 year old graduate.