Property and retail, triumph of hope after 5 years of woe
Post-budget release as people show confidence in spending and property. Noonan optimistic
A BUOYANT Michael Noonan has heralded better-than-expected retail figures and the rise in Dublin property prices as the best signs yet that "confidence is returning" to the economy.
The Finance Minister's second budget appears to have been regarded as less harsh than expected by the public. Retail bosses and economists agree this helped to unlock pent-up consumer spending in the run-up to Christmas and in the sales, with some shops 20 per cent ahead of this time last year.
Added to this are the latest CSO figures, which showed house prices in the capital recorded their largest month-on-month increase since September 2006 – 2.4 per cent – prompting realistic hopes of a sustainable recovery in 2013.
Speaking to the Sunday Independent yesterday, Mr Noonan said that while painful measures in the budget had to be implemented, it was clear that confidence is returning, and it is his intention to build on these tentative positive signs of recovery.
He said: "There are signs that confidence is returning. Unemployment fell by 3,600 on an annual basis in quarter three, the first year-on-year fall since 2005. Retail sales have recorded strong growth. Property prices in Dublin have shown an increase over the course of this year.
"These and other measures, such as exports, illustrate the Government's plan is working. We know that it is not easy and it will take time, but we will implement the budget measures to ensure we build on these positive signs."
Mr Noonan pointed to the fact that the Government did not put up income tax – an increase, he said, which can have the "most negative impact on employment levels and economic confidence".
"We have set out that the tax adjustments in future budgets will be far lower than in recent budgets," he said.
"I think this certainty is essential in giving people confidence to spend and invest. It is only through this spending and investment that we will see sizeable job increases."
Since the start of the sales on St Stephen's Day, shops nationwide have been reporting significant increases in trade on last year, while a rush of first-time home buyers eager to benefit from mortgage interest relief boosted property prices last month, which are up 1.1 per cent nationally.
One of the country's leading developers, Michael O'Flynn, said 2013 would see the beginning of a recovery in the property market, and 2014 could even see a house "price bounce" beginning with Dublin and Cork.
Speaking to the Sunday Independent, he said: "With careful investment, I believe this coming year will see people realising there is an issue. Will we see the investment? I hope so. I think there will be a price bounce. It's unlikely this coming year, but probably the next year.
"I think a lot of housing shortages will show up in the next 12 months. I do think 2013 is going to be the inflection year in terms of change."
"Things certainly tightened up in the run-up to the budget, many felt it was not as bad as expected," he said. "One store I was in said they were 22 per cent up on this time last year.
"It's simple – if people have confidence, they will spend."
Retail Excellence Ireland chief executive David Fitzsimmons welcomed the surge in consumer spending and said it had lifted the spirits of the business community.
"We are seeing growth for the first time in five years at about two-and-a-half per cent pre-Christmas," he said.
"The sales activity on St Stephen's Day and Thursday is probably up around seven or eight per cent. When you are facing declines year-on-year of 15 to 20 per cent, even marginal growth is great. Instead of cutting labour you are now going in and saying, 'Your jobs are safe' and 'Let's look to invest in the business'."
Retail consultant James Burke said the sales were the "strongest we've seen in 10 years", but cautioned that it may be too soon to definitively say consumer confidence had returned to the retail sector.
"There is small movement, but there is a huge distance to go because it has been falling for so many years, but there are small indicators," he said.
"More retailers are realising where they are and saying to themselves that they have to fight hard to get out of here."
Kilkenny Shop director Marian O'Gorman made the same observation, even though her Dublin city centre business expects to record between five and eight per cent growth for 2012.
She said: "People are buying a lot fewer and smaller items. They have a budget and they are not going over it. Normally you could attract a guy to buy a wallet with a handbag, but now it's just one item."
Retail Excellence Ireland's store of the year, McElhinney's in Donegal, also recorded a good 12 months for sales and hopes to see growth for the second year in a row.
Director Martin McElhinney said the strong pound and the outbreak of violence in Belfast before Christmas saw shoppers from the North flock across the Border.