The other area where Ireland is out of kilter is housing. Housing & related utility costs have a weighting of over 30% in Germany & Norway while only 16.5% in Ireland. The lucky Italians allocate just 10% of their expenditure on such costs. And they have the sun for most of the year! Taxation or in this case the lack of it keeps Irish housing costs artificially low.
With all of the money the Italians save on housing, no wonder they are the best dressed people in Europe. They allocate nearly twice as much of their expenditure on clothing as the dowdy Germans. Of course unlike us and the Brits, they have not discovered the pleasures of throwaway clothing from Penny’s/Primark! They also spend far more than anyone else on food, nearly 17% of expenditure.
Irish consumer expenditure on education accounts for just 2% of our spending, but the Norwegians, with a similar number of young people spend just .24%. Private schools and rugby are clearly unknown in Oslo, Tromsø & Bergen. We also spend far more on communications (for poorer services) than anyone else.
Amusing as the differences and possible stereotypes are, e.g. the Irish are clearly scruffy drunks and the Italians spend all their time in the kitchen wearing Armani, there was a more serious reason for looking at the figures.
Housing and related costs accounted for 70% of the fall in prices in 2009. We still pay far more than citizens in most other countries for goods and services. There must remain considerable room for price falls in 2010 and even 2011 as our prices move closer to European norms. Changes in taxation, such as further lowering of VAT and replacing it with property based taxation can help. I must also mention once more commercial rents which remain the largest cost for many small businesses.
There is a serious challenge for a Government to manage such an adjustment without sending us into a Japanese style spiral of deflationary depression.
2 comments:
RE housing
Is this HICP data?
Here is a quote from the ECB "The only significant area of consumption currently not covered is expenditure on housing by homeowners." http://www.ecb.int/stats/prices/hicp/html/index.en.html
As Ireland has a higher rate of home ownership I don't consider the housing figure to be comparable.
I agree 100% about commercial rents. Lowering commercial rents would make it easier to set up a business (from retail to legal practice), leading to both self employment and more competition (so lower prices), and a better overall economic situation.
However,
1) does SME or IBEC actually want more competition for their members
2) Has the government committed itself to a high property price and rental price market through NAMA?
Rory, No it is the CPI. There is less of a variance within the HICP figures, however the big difference in the housing figure is the degree of local charges in continental countries.
The views of ISME & IBEC seem to depend on the industry involved. In general though, many made a lot of money from running nice little cartels over the past 20 years or so. The drinks industry is perhaps the best example of that.
Yes, the Government is tied into the high property price model to justify the whole NAMA operation. I can't however believe that the NTMA people will risk their personal or collective reputations on it. Their primary role is managing State debt. To do this effectively they need the confidence of the market, which does not believe the value levels suggested by the cheerleaders of the property industry.
It is interesting to note that there has been a number of articles in the last few weeks suggesting that residential rents were bottoming out. Now I stood waiting for a bus on a nearly deserted Parnell Sq this morning at 7.55 am. Emigration and unemployment have not "bottomed out" nor will rents for some time!
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