Republic’s wealth divide driven increasingly by property

The Central Bank of Ireland’s latest quarterly accounts, detailing the fact that the net wealth of Irish households now eclipses €1 trillion, tell us two incontrovertible facts about the world in which we live. First, household wealth is increasingly a function of real estate assets rather than earnings. Second, property is now the chief dividing line between rich and poor. Those on the wrong side of this line are being gradually marginalised, geographically and financially, and politics is fraying as a result.

Homeownership rates among young working adults in Ireland have collapsed in the face of rising house prices. Research by the Economic and Social Research Institute suggests that the share of 25- to 34-year-olds who own their own home more than halved between 2004 and 2019, falling from 60 per cent to just 27 per cent.

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The Central Bank’s latest figures show the value of privately owned real estate assets rose by about €95 billion year on year in the first quarter, representing “the highest annual revaluations on record”. This while the economy was blighted by a pandemic. It’s a testament to the perennial appeal of property as an investment and the scrap to get on the ladder here that the market could generate this level of appreciation amid such uncertainty. Even in the teeth of the current crisis, with incomes being eroded by higher energy and food prices, property prices are rising by more than 14 per cent nationally.

The regulator’s numbers show that about two-thirds (€649 billion) of household wealth in the Republic is tied up in property. This may in fact underestimate property’s position on the balance sheet for various technical reasons. Other surveys suggest it may account for 90 per cent of household wealth here.

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At the same time, the Government relies nearly exclusively on labour, consumer spending and business taxes to run the State. Shifting the burden of taxation away from labour to property has long been advocated on the grounds that work is more productive and beneficial to society and property less so. This feeds into a long-standing critique of the current system — namely that inherited wealth, which tends to be property, offers riches simply unattainable by working and saving.