The cost of living either side of the border

The issue of the cost of living either side of the Irish border received renewed interest today, following Senator Ian Marshall’s comments on the Sunday Politics that a single person in Northern Ireland is left with about £16,000 [at the end of a year], whereas the same person in the Republic would be left with €1,900 in their pocket.

The Senator’s logic was that the cost of living is higher south of the border, and to an extent this is true. Comparisons of the cost of living are always going to be fraught with over-simplifications given that everyone is going to have unique personal circumstances. However, I thought it might be interesting to look at average incomes and housing costs across different areas of Ireland both north and south of the border to evaluate how households in either jurisdiction might perceive the cost of living.

The table below shows how average household disposable income (i.e. income net of tax but after transfers such as benefits) compares with the average cost of renting a 3 bed semi-detached house in each area; counties in the Republic and local government districts in Northern Ireland.

The income figures are from 2016, and the housing costs from 2018; currently rental costs in the Republic are rising by around 10% per year. I have used the exchange rate of £1 = €1.17 (from the end of 2016), and used an average household size of 2.5 in Northern Ireland and 2.7 in the Republic. I have assumed average monthly healthcare costs of €155 in the south and nil in the north.

Even after the high cost of rent in Dublin, the very high incomes in the city put it top of the table for income after rent and healthcare. However, given that rent has increased so rapidly in the city, it is likely that it will have been overtaken by Limerick in the overall affordability stakes. Of course, some people will pay a mortgage rather than rent, so housing costs can vary dramatically.

What this analysis has not taken into account is the additional cost of living south of the border on items such as groceries and utilities, which is estimated to be in the region of 20% higher. This means that the typical cost of living will likely feel higher in County Donegal compared with across the border in Derry, even though incomes and housing costs will be roughly similar.

In both the north and the south, the poorest areas are to be found in the immediate vicinity of the border. In the Republic, the wealthiest areas are found in and around the larger cities, but the same is not true of the larger cities in the north.

Sharp rises in the cost of housing over the last ten years will have had a corrosive effect on many people’s personal finances in the Republic, as the chart of increases in rental prices in Ireland compared with Great Britain and Northern Ireland since 2012 shows. Housing and healthcare were given as the two biggest issues at the recent general election, and given the massive increase in the cost of housing, it is not hard to see why.

The question of whether the cost of living is cheaper north or south of the border is complex. Affluent areas in the Belfast commuter belt could feel that living is more affordable than almost anywhere else in Ireland, and border areas in the Republic could perceive that the cost of living to be more expensive than areas on the other side of the border. However, cities such as Belfast and Derry are clearly lagging behind cities of equivalent size in the south such as Cork and Waterford, even once the cost of living is taken into account.

Whilst there isn’t a simple answer to the question of which side of the border has the highest cost of living, the two most pressing issues (other than healthcare) either side of the border are expensive housing in the south, and comparatively lower incomes in the north.