For many of us, thinking back to times of the family gathered round a Monopoly board brings back fond memories. With the objectives of the game teaching us the principles of home-ownership and accumulating wealth, we’d be forgiven for believing that acquiring property in adulthood would be as easy as making a few clever moves and being nice to the banker.
However, the game taught us a few things that are still relevant today - the most expensive streets on the Irish Monopoly board remain the most expensive places to buy property - but unfortunately even the more ‘affordable’ locations are still beyond the reach of many. So are we destined to be a nation of renters? And what does that mean for our financial futures?
Generation rent is growing fast
To understand the renting situation in Ireland, we have to acknowledge the tidal turn of change which has occurred in the last 16 years – with the number of rented properties more than doubling over that period. In 2002 there were 229,665 rented properties in Ireland. At the last Census in 2016 there were 497,111. And with demand far outweighing supply in the last two years, it has only increased further since then.
Home ownership in Ireland has become something of a minefield. In 2017 house prices in Dublin increased by 10.8 per cent, while the cost of apartments spiked by nearly 15 per cent. Outside the capital, prices in the rest of the country climbed more than 13 per cent. This double digit inflation looks set to continue for 2018 and with salary growth not being matched, soaring house prices have left it very difficult for people to get a foot on the property ladder.
The number of people renting in Ireland today is almost 900,000. The economic issue of rising house prices is one reason for this, however, there's also a rising trend of rejecting home ownership in favour of flexibility, much like some of our European counterparts where renting is the status quo. In fact recent research by Irish Life showed that one in five of those renting don't expect to ever own a home.
Traditionally in Ireland, renters were made up of students and young professionals. Nowadays there is no typical profile; it’s single parent families to 2.4 nuclear families, singletons to co-habiting couples, students to retirees, and everyone in between. However, research carried out by Irish Life also highlights a worrying reality – that the majority of renters are extremely under-covered financially and in a very vulnerable position should anything happen to them.
Are homeowners better protected?
Let’s consider the facts. If you’re applying for a mortgage in Ireland, most institutions won’t approve your application unless you have secured mortgage protection; insurance that will pay your mortgage should anything happen that would prevent you from being able to pay off your mortgage.
While it ticks a big box, mortgage protection doesn’t cover you for all your financial needs. However, it does provide an important level of cover and, it also encourages homeowners to consider other levels of protection they may need such as income protection.
Renters on the other hand aren’t required to have any sort of protection in place in order to secure accommodation, yet they sign a lease that contractually binds them to make regular payments over a set period of time. So what if something happened to them and they couldn’t pay their rent? Who would pay it for them?
The worrying disparity between homeowners and renters really becomes clear when we look at the statistics; only 38 per cent of renters in Ireland have some sort of financial protection in place compared to 60 per cent of homeowners.
Life insurance for when you need it most
For many people, life insurance is perceived as being solely for financial cover in case of death – so the life that was insured would be able to provide for their loved ones should they die. But there are many different types of life insurance – such as income protection – which covers you if you were unable to work for a prolonged period of time due to illness or injury. This means you could still get up to 75 per cent of your salary paid to you every month to ensure outgoings such as bills and rent payments are kept ticking over.
These are the ‘living benefits’ of life insurance plans; benefits that enable you to continue living without having to worry about the financial side of your situation. There are also other plans, such as specified illness cover, which will pay you a tax-free lump sum of cash if you are diagnosed with a listed specified illness (e.g malignant cancers). This is for you to use as you please – to help with your recovery, to provide financial support or to treat yourself to a break away. It’s a financial cushion that should help you any which way you choose during times of difficulty.
The first step is to consider your “what ifs?”
Unfortunately none of us know what’s around the corner and although we may not like to think about it, it is worth considering your ‘what if’ scenarios from time to time. What if you couldn’t work due to illness? If you had to forego your monthly salary, what impact would that have on your finances and your family?
These are the types of questions that people should consider, especially renters, who estimated that they could survive for just three months on average if they were unable to work. In addition to this, almost two in three renters say that their landlords would take action if they missed just two rent payments. With an income protection plan in place, renters could be confident their household expenses and their day-to-day costs were covered.
Taking control of your financial future
Changes in socioeconomics mean that the traditional triggers to get life insurance (such as marriage, having kids, buying your first home) are happening later in people’s lives.
But in 2017, Irish Life paid twice as many claims for ‘living benefits’ (such as income protection or specified illness cover), as they did for death claims. This shows that despite the behavioural cultures of postponing life insurance, there is a very real need to be protected for the ‘what ifs’.
Fortunately, more Irish people are taking control of their financial futures and educating themselves about life insurance, with one in three considering taking out a plan in the next 12 months.
This is a positive step in the right direction. If the renting trend is set to continue and if we are destined to be a nation of renters, we need to set ourselves up for the long-term and ensure that we are able to weather any financial storms that come our way, by protecting ourselves and our loved ones.