Growth in spending on houses and cars as consumer confidence increases

Consumer spending showing signs of modest growth amid rapid increases in spending on “big ticket” items such as houses and cars.

The quarterly Consumer Market Monitor (CMM), by The Marketing Institute of Ireland and UCD Michael Smurfit Graduate Business School, reports that 114,446 new cars were licensed in the first nine months of the year — an increase of 31%, while 21,876 residential properties were sold in the first half of 2015, also up 31%.

The increase in property sales is also reflected in the growth in spending on household goods.

Furniture and lighting are up by 18.7% in volume in the third quarter year-on-year, electrical goods are up 13%, and hardware, paints, and glass are up 4.5%.

However, the CMM also reports that household debt levels in Ireland remain relatively high at 167% of disposable income, compared with a eurozone average of just over 90%.

Borrowing by Irish consumers stands at €92bn, down 39% from the peak of €150bn in March 2008.

Retail sales — which stabilised in 2012 — have seen a growth of sales volume by 6.2% for the year to the end of September.

Mary Lambkin, professor of marketing at UCD Smurfit School, said that consumer spending accounts for more than 50% of gross national product (GNP) in Ireland.

“Disposable incomes are at last beginning to show modest growth as a result of jobs growth and this, coupled with greater availability of credit, is leading to accelerated spending on many categories of goods and services,” said Dr Lambkin.

“Overall, retail sales have turned a corner and are back on a growth path, and the pace of growth is steadily accelerating.”

Meanwhile, a separate report by AA Insurance has found that the annual cost of owning and maintaining a family home has dropped for the first time in four years to €16,210.49.

The AA report claims that the decrease comes despite a 6.2% rise in the national average price of a second-hand house in Ireland.

The AA director of consumer affairs, Conor Faughnan, said that current mortgage lending rates are considerably lower now than this period last year, which was a key driver in the year-on-year decrease.

The AA says that those who take out a 90% mortgage to buy a house at the average property price this year are likely to pay €9,417.03 per annum — down 6.7% on last year.

However, the report also states that those who bought at the peak of the Celtic Tiger in 2007 currently pay €6,257.49, or a 66.45% more on their mortgage repayments than those who purchased their homes in the third quarter of this year.

Other average annual costs taken into account in the AA report included home insurance (€492), telephone and broadband bills (€453), household appliances (€542), household cleaning products (€320), domestic refuse collection costs (€292), water charges (€260), television licence costs (€160), heating costs (€989), and electricity bills (€1,117).