Return of the 'wealth effect' drives new surge in spending
A surge in spending on foreign holidays, home improvements and household goods has been sparked by the so-called ''wealth effect'', consumer confidence propelled by soaring property prices.
One key barometer of burgeoning confidence is a spending spree on home improvements this year, including high-value extensions, new kitchens and other renovations, revealed in new Revenue Commissioners figures obtained by the Sunday Independent. As escalating house prices limit the ability of families to trade up, homeowners are spending huge amounts to improve their homes.
House prices are rising at a rate of €50 a day, according to a Daft.ie survey.
Promised pay increases next year, and near full employment are also fuelling increased spending, economists believe.
Holiday bookings are also up 7pc in the past 12 months.
Overall, property prices have risen almost 47pc on average since their lowest point at the height of the economic crash in late 2013.
In addition, household debt is at its lowest level since 2005.
It is now 30pc less than its 2008 peak.
A cautious shift in consumer sentiment has been evident since early this year.
Alan McQuaid, chief economist at Merrion Stockbrokers, says people are generally feeling better off as the economy continues to improve.
"A lot of people have houses - so there's wealth in their property."
He also pointed out there is a 'wealth effect' in the recovery of property prices for those who were in negative equity.
"There's no doubt that psychologically all this makes people feel better."