Ireland after NAMA

There will be tens of thousands of words written this week about Donald Trump’s first year as President of the United States. His first 12 months has been characterised by a gummed-up domestic policy and letting the military apparatus do what it wants elsewhere in the world. In Europe, we may look askance and turn our noses up at the sheer grubbiness of it all. Within the EU we may find ourselves silently smug about how different things are here in Europe. There are however echoes of Trump’s vision for Making America Great Again (MAGA) among the 27 members of the Union. In Hungary, Poland and Austria, right wing parties lay bare the ugly face of late capitalism with anti-immigration measures and welfare retrenchment. In the UK, the unfolding Brexit mess brings with it a number of considerable political and economic costs yet to fully explored. Anyone living near the border in Ireland could attest to this. Similarly, people in Ireland are not immune to the midnight tweetings and wild policy pursuits of a leader who may not see out his first term without a dirty political fight. Trump and his cabinet are determined to bring jobs back from overseas to employ US residents as a way of shoring up working class support. It is not clear yet how US capitalists are taking to this idea but even a moderate success in this regard would make a considerable difference to the Irish economy, north and south.

Two incidents in recent weeks point to how this may unfurl in Ireland. Firstly, Apple is planning to build a data centre near to the town of Athenry, Galway. The planning application has been upheld but not without a chance for the High Court to review a decision to allow An Bord Pleanala’s decision to have effect. Two residents sought a review of the decision on a technical ground.  They claimed that the EIA was based on eight halls of data servers and not only one as sought in the application. Other people in Athenry have been out marching in favour of the planning application, citing that jobs would be lost to some other location if local politicians do not support the application. Not unrelated to these movements of course is the fact that the Irish state will bend over backwards to accommodate a company that owes us at least €13,000,000,000 in unpaid tax. On his return from a recent US visit, the Taoiseach Leo Varadkar committed to Apple, indicating that his government will do anything to curry the company’s favour. It has been reported that “the Cabinet is developing a detailed position on the role and importance of data centers, including on their designation as strategic infrastructure”. It is not at all clear how many jobs would result in the Athenry project (perhaps 100?) but it will be a significant drain on our electricity grid.

During this time, across north America, cities have been competing for Amazon’s second headquarters. Mexican, Canadian and US cities have been offering tax breaks, highway construction and whole city blocks in bids to ensure Bezos’s company would land in their turf. As an aside, it was not radically different under previous administrations, Obama’s included. ‘Infrastructure’ is fast becoming code for the reshaping of entire cities using privately held surplus. This resonates in Ireland where a deeply embedded cluster of policies lowers corporate tax rates and environmental monitoring to ensure foreign direct investment. In Ireland we like to convince ourselves that FDI is because we offer an educated and English-speaking workforce, implicating all schoolchildren in an ideological project since at least the mid-1970s. In reality, as the Panama Papers, Wikileaks and the Paradise Papers all make clear, Ireland’s economy is best in class for tax avoidance. International best practice eludes our health service but in the matter of squirrelling money forced out of people’s labour and pockets, we are among the elite. (What is it about islands and tax avoidance?)

Global finance and money moves quickly around the world, landing in different places in different ways. Regional geographers and others examine this unevenness in great detail. We need, however, to connect political struggles like the election of Trump and the re-emergence of reactionary governments in the EU with this unevenness. The attraction of high quality jobs can no longer act as cover for large scale tax avoidance and politicians in Ireland may have to realise that quicker than they think. The game with the highest stakes is that of money flow derived from profit. The implications of MAGA are being felt in east Galway and elsewhere in the Republic. This is not because of what elected politicians have or have not done in Galway but because of what happens in Washington and California.

Eoin O’Mahony

Teaching Fellow, School of Geography, UCD.

After Thursday’s post looking at the house price register to gauge the level of market activity in Dublin, I’ve also now had a look at the mortgage draw down data produced by the Irish Banking Federation and PwC.  Their database runs from Q1 2005 to Q2 2013 and claims to include 95% of the Irish residential mortgage transactions; the data is not geographically disaggregated.

Thursday’s post revealed that the number of sales in Dublin had been steady year-on-year across quarters, with the exception of Q4 2012 when there was a spike in sales due to the ending of mortgage interest relief.  In other words, there has been little noticable difference in the volume of housing sales during 2013 compared with 2010.

The IBF PwC data reveals a similar pattern of purchasing, including the Q4 2012 spike.  If we compare Q2 volumes from 2010-2013, the volumes are Q2 2010 – 7,827; 2011 – 3,551; 2012 – 3,225; 2013 – 3,229.  In other words, there was a large drop from Q2 2010 to Q2 2011, and then the same volumes for the next three years.  For reference, draw downs in Q2 2013 were only 5.9% of those in Q2 2006 (53,499).

This pattern is consistent when we remove buy to let, re-mortgaging and top-up mortgages (though these were more prevalent in 2010) so that we only examine first-time buyer and purchaser mover figures.

As with the house price register data, the mortgage draw down data does not suggest that there is a pick up in the housing market to any great degree.  There was a brief surge in Q4 2012 due to MIR ending, but the market has since reverted to the same state of play as 2011 and 2012.

So that’s two pieces of hard evidence – one generated from Revenue data (inc cash sales) and one by the banking industry – that cast doubt on property sector rhetoric that there has been an upswing in the housing sales.  That’s not to say that there has not been an increase in market activity in terms of viewings and multiple bids on some properties, but that this is restricted to a select group of properties and is not translating into an overall increase in sales.

Rob Kitchin

I have previously commented on this site about the impact of unsustainably high rents on businesses in Dublin city centre, and particularly in the Grafton Street Area. Almost a year on, things are beginning to look a little different on Grafton Street. At the Southern end of the street, for example, Dunnes Stores has reopened in recent months and a Disney Store is due to occupy the unit next door, with work currently underway.  Meanwhile, across the street a 3D Games shop has opened in what was then a vacant unit.  Further down the street, the former West Jewellers  has recently been bought by Brereton Jewellers and is therefore likely to be reoccupied in the near future. Furthermore, the two units on South Anne Street, which appeared in the image with West Jewellers last February, are now occupied (Opticks Eyewear and Madison furnishing and interiors store).

West Jewellers and Surroundings, corner of Grafton Street and South Anne Street, February 2010. Photo by Philip Lawton

West Jewellers and Surroundings, corner of Grafton Street and South Anne Street, December 2010. Photo by Philip Lawton

Still, however, the issue of rent is high on the agenda. One graphic illustration of this is the ‘High Rents Are Killing Our Jobs’ sign which hangs above Korky’s shoe shop on Grafton Street. Spreading the net a little wider, but staying in roughly the same area, the current crisis has claimed a number of high-profile eateries.  Although the closure of some ‘Celtic Tiger’ establishments, such as Nude on Suffolk Street, may be an indication of shifting consumer habits, a letter to the Irish Times, last Friday, 14th January from the owners of  Mermaid and Gruel on Dame Street cites what they refer to as the “…intransigence of landords who still demand boom-time rents…” as the predominant factor in the closure of their restaurants. While the ban on upward only rent reviews and the fall in values offers potential for new-comers, it seems high rents are still placing a serious burden on existing businesses. Furthermore, this is not in any way confined to the area that I have focused on here, but, as highlighted by various media sources (eg; Galway and Athlone), is a national issue.

Philip Lawton

Korky's Shoe Shop Grafton Street, December, 2010. Photo by Philip Lawton

Recent attention to the closure, followed by re-opening, of Carluccio’s (Which itself had only recently replaced the long-established Graham O’Sullivan’s) on Dawson Street in Dublin raises a number of interesting issues regarding city centre rents, recent planning practices, and attitudes to retail trade amongst a number of bodies within Dublin city centre.

Throughout the boom years a number of prime retail areas in the city centre were designated by Dublin City Council as Architectural Conservation Areas (ACA’s), and, directly connected to this, Schemes of Special Planning Control (SSPC) (An area had to be designated as an ACA in order to become a  SSPC). While seeming somewhat innocuous in their own right, there was a particular rational for so many retail areas to be designated as such. A primary aim of a Scheme of Special Planning Control is to remove what are perceived as ‘undesirable uses’ (fast food outlets, convenience stores) and attain ‘Higher Value Uses’, or ‘niche’ shopping, in an area. Furthermore, such uses, it is perceived, will then attract higher rents, and higher land values which would support more of the same higher end uses. However, in reality, prior to the bust, it seemed it was those stores that were best able to pay higher rents that remained in an area where land values were going up. This, somewhat ironically, includes fast-food outlets, such as McDonalds and Burger King.

While the above connections may seem slightly tentative, the introduction of  the Business Improvement Districts (BIDs) model to Dublin is more explicit in terms of the connection between the re-ordering and increased control of urban space and higher land-values. Just over a year and a half ago, the designation of much of the city centre area as a BID was heralded for its ability “to increase footfall, decrease crime, increase property values and overall trading performance.” Therefore, it must be assumed that the potential for higher rent generation is also perceived as one of the positive outcomes of the BID. Given that the Dublin City Business Association was directly involved with, and lobbied for the introduction of, the BID, it must also be assumed that they were also in favour of higher rents. Now, as illustrated by recent reports, and despite the removal of upward only rent reviews, city centre retailers, such as the owner of Korky’s shoe store on Grafton Street, are becoming increasingly worried about the impact of the retention of higher rents that they cannot afford on the future viability of their business.

If it is these high rental values which are now turning out to be the nemesis of the viability of trading in the city centre, the question must be asked as to why higher land-values were heralded as one of the positive outcomes of the BID mechanism. It seems that the desire for more up-market  land-uses only ads to an already existing cycle of unsustainable rent increases, which in turn, as evidenced by the growing number of empty units on streets such as Grafton Street, leads to vacancy.

Philip Lawton

Buried in the new finance bill is a measure designed to help kick-start the IFSC back into life as a finance investment magnet – the amending of tax laws to enable of Shari`ah-compliant financial transactions (as noted in the Irish Times and Islam Online).  According to Islam Online, ‘Islam forbids Muslims from usury, receiving or paying interest on loans. Islamic banks and finance institutions cannot receive or provide funds for anything involving alcohol, gambling, pornography, tobacco, weapons or pork.  Shari`ah-compliant financing deals resemble lease-to-own arrangements, layaway plans, joint purchase and sale agreements, or partnerships.  The new provisions will treat returns on Shari`ah-compliant products as interest for taxations purposes. The measure covers a range of credit transactions and allows for the creation of investment securities similar to sukuks (Islamic bonds).’   (more…)