The Government’s planned budgetary package risks keeping inflation higher for longer, the Central Bank of Ireland has warned. Proposed changes to income tax and spending increases above the 5 per cent spending rule, were likely to “amplify demand in an economy already operating at capacity”, the bank said in its latest quarterly bulletin. Eoin Burke-Kennedy reports. The warning comes as the Central Bank downgraded the nation’s economic growth forecasts.
Eoin also reports that higher mortgage costs are continuing to take the heat out of the property market with prices rising at an annualised rate of just 1.5 per cent in July, with Dublin prices dropping the most in three years.
Local radio stations will have to sign up to new commitments on Irish language programmes when their licences are being renewed, the media regulator has decided. John Burns has the story.
In her column, Bernice Harrison looks at the new road safety campaign, and if marketing drive to reduce road deaths can work.
The Government should increase the tax-free threshold of its rent-a-room scheme from the current level of €14,000 in order to combat the State’s growing accommodation crisis, according to most respondents to a survey carried out by Taxback.com. Joe Brennan reports.
Cantillon assesses the increasing politicisation of the Budget, while also looking at what lies ahead for Kingspan’s planned takeover of Nording Waterproofing.
Grocery price inflation has fallen to its lowest level in a full year and has now declined for the fourth successive month, with retail analysts Kantar suggesting the rate of price growth will ease further as the year comes to an end. Conor Pope reports.
Food group Glanbia has signed up as the lead sponsor of Kilkenny’s camogie team, having previously backed the team under the Avonmore brand, which is now under different ownership. Ciaran Hancock has the details.
Wine sales in the Republic remained below pre-pandemic levels last year as per capita consumption continued to fall in line with a general trend towards more moderate drinking. Ian Curran has the story.
Four shareholders of a liquidated company must now pay a combined income tax bill of €1.56 million after they lost an 11-year-long tax battle with Revenue Commissioners concerning a €7.59 million payout arising from the voluntary liquidation of the company at the Tax Appeals Commission. Gordon Deegan has read the commission’s report.
Dublin-based agricultural technology company Micron Agritech has raised €2.7 million in funding. Colin Gleeson reports.
Colin also reports that Irish oil explorer Petrel Resources incurred a loss of €164,206 in the six months to end of June as the company warned of “significant doubt” on its ability to continue as a going concern.
In Your Money, Fiona Reddan details how you can maximise returns on your savings, while Dominic Coyle looks at the options available to boost savings for a grandchild.
In Me & My Money, screenwriter Susan E Connolly talks through her finances.
Finally StockTake looks at should Smurfit Kappa shareholders be celebrating its planned takeover of WestRock.
Stay up to date with all our business news: sign up to our Business Today daily email news digest. If you’d like to read more about the issues that affect your finances try signing up to On the Money, the weekly newsletter from our personal finance team, which will be issued every Friday to Irish Times subscribers.
The Irish commercial investment property market came to a “near standstill” in the second quarter, which was the weakest for six years, according to a new report by BNP Paribas. Laura Slattery has the details.
The number of people with high interest rate home loans stuck in investment funds who could actually switch to banks offering lower rates is far less than the 54,000 suggested by the Central Bank, according to a leading mortgage specialist. Conor Pope has the story.
Laura also reports that RDS chief executive Geraldine Ruane has stepped down from her role, the board of the Dublin events venue has announced. The move comes after days of speculation about her position.
Working from home has been one of the biggest changes since the start of the pandemic. Pilita Clarke looks at what happens now as companies try to get workers back to the office.
Aer Lingus has reopened its pilots training programme after a four year break, as the carrier forges ahead.
Revolut will offer car insurance to motorists in the Irish market after agreeing a partnership with insurance giant AIG. Laura reports. The fintech, one of Europe’s most valuable, company will offer the chance to buy Revolut car insurance to 3,000 customers from today and then roll out the product to all customers in the coming months, it said.
As we grapple with the green transition, Brooke Masters looks at how retrofitting existing buildings may be cheaper, and more effective, than replacing them entirely with new builds.
McKinsey chief Bob Sternfels has signalled he plans to run for a second term as managing partner as he rebuilds the consultancy after years of reputational crises and as the firm battles mounting economic and geopolitical challenges.
Finally, as the ECB hikes interest rates, banks have been passing on much of those increases to borrowers. Robert Whelan of Rockwell Financial says its now time for savers to get those increases too.
Stay up to date with all our business news: sign up to our Business Today daily email news digest. If you’d like to read more about the issues that affect your finances try signing up to On the Money, the weekly newsletter from our personal finance team, which will be issued every Friday to Irish Times subscribers.
The global financial meltdown of 2008 was triggered largely by overpriced residential property values. The US sub-prime mortgage market, large swathes of which had been bundled together or securitised in vehicles few outside the financial sector understood or kept a close eye on, was the first to blow.
The Irish property market, which had been bid up in value like the Dutch tulip, followed soon after, blowing a hole through the domestic banking sector and eventually through the sovereign via the infamous bank guarantee.
[ US banks prepare for losses in rush for commercial property exit ]
[ ‘Strong’ first quarter for commercial property as deal sizes swell ]
This time around, the weak link in the global financial chain is not residential but commercial. That’s not to say we’re going see anything like what happened in 2008 – banks aren’t tied into property (commercial or residential) in the same way – but there is increased speculation that “stretched valuations” in the commercial sector have been found out by higher interest rates. And there is also the structural challenge of fewer people working in offices.
“Amid the rapid tightening of monetary policy, global commercial real estate markets are particularly vulnerable due to concerns over stretched valuations and the increase in non-bank and international financing of the sector,” the Irish Central Bank noted in its latest Financial Stability Review.
“The sector is facing both cyclical headwinds, due to rising interest rates, as well as structural challenges, including the growth in home working affecting the office segment,” it said.
[ Richard Barrett’s Bartra seeks occupier for new Dublin docklands office ]
Commercial property companies borrowed heavily in recent years to fuel expansion and now face significantly higher refinancing costs.
According to commercial real estate specialist CBRE, demand for office space in Dublin slumped in the first quarter of this year on a back of a global slowdown in tech and as more employees opt for hybrid working conditions with the take-up of office space totalling 26,437 sq m, down 42 per cent quarter last year.
While residential markets are also vulnerable to higher interest rates after a long build-up in price appreciation and household leverage, the regulator seemed to dampen concern about a crash or credit crunch here, noting the tick-up in arrears from the current cycle of rate hikes was still modest.
House prices and rents are expected to continue increasing with demand exceeding supply in the medium term, the Oireachtas Committee on Budgetary Oversight has heard.
Dr Kieran McQuinn of the Economic and Social Research Institute (ESRI) outlined economic data indicating a more positive general outlook than had been anticipated last year.
Among record levels of employment and a now favourable domestic macroeconomic outlook for 2024, the country’s housing crisis continues to cast a shadow, however.
At the Oireachtas committee on Wednesday, addressing the Pre-Stability Programme Update, Dr McQuinn highlighted the housing market as one area in which the economy is likely to face continued pressure.
Despite an upward underlying trend in home build completions, he said, new population estimates due later this year mean demand is likely to be revised upward.
“This means that the demand for housing is likely to exceed the supply over the medium term,” he said.
[ Rental market shrinks by 80,000 homes in 10 years, housing conference told ]
[ Pilot project aims to deliver retrofits across social and private housing in North Dublin estate ]
“As a result, house price inflation and along with increases in rents are likely to continue, albeit, in the case of house prices, at a slower pace than was the case in 2022.”
Dr McQuinn told the committee that between 26,000 and 28,000 housing units are expected this year, a level rising to in excess of 30,000 in 2024.
An impending supply-demand imbalance is based on estimates, although Dr McQuinn said demand was likely to reach in excess of 35,000 to 40,000 units, or possibly higher.
“You are going to see an imbalance I would say, a continuing imbalance over the next two to three years I would say at least.”
Asked by Sinn Féin finance spokesman Pearse Doherty how this might affect homelessness, Dr McQuinn said this has not been explicitly forecast by the ESRI but “certainly as long as rents continue to increase and as long as you have that imbalance you are going to see continued pressures as far as homelessness is concerned”.
Indeed recent activity levels have been somewhat stronger than we would have expected going into the winter months
— Vasileios Madouros
According to the ESRI, the pace of growth across most western economies in the first quarter of 2023 has been stronger than expected and a modest decline in inflationary pressures has relaxed fears of international recession.
Further improvements in the public finances are also expected, Dr McQuinn said, with a significant surplus and a further reduction in debt to GDP. International and domestic inflation rates are set to be “notably lower” than had been expected. The ESRI favours a site-value tax, rather than concentrating tax on labour.
On the medium-term fiscal outlook, Vasileios Madouros, deputy governor of the Central Bank of Ireland, said that while macroeconomic conditions were still challenging due to inflation, the economy had proven resilient.
“Indeed recent activity levels have been somewhat stronger than we would have expected going into the winter months,” he said.