📰 Trending News

Irish economic news, in summary and context.

Lifting the Eviction Ban

In a crisis of housing supply, there is a general level of “pain” in the housing market. One way you can think about eviction bans is that they shift this pain from the most vulnerable group, renters (at the highest risk of homelessness) to a less vulnerable group, landlords (those with spare houses).

In this model eviction bans don’t actually lessen the quantity of pain in the market, they just shift it around. You need other policies to reduce the total pain – massive social housing construction, land value taxes, zoning regulation reform etc.

If anything, eviction bans probably slightly increase the total amount of pain over time by adding stasis to the market. The housing needs of tenants and landlords change over time, households grow and shrink, but everyone is stuck.

So eviction bans should ideally have an end date, which begs the question – how do you decide to end it?

If you’re the housing minister, I think it depends on your level of optimism. If you have an array of policies in place, like the ones mentioned above, which are going to lower the overall level of pain in the market, then you wait. The longer you can hold out, the more rental properties will be available, the less pain you’ll eventually be shifting back onto renters.

If you’re not confident that anything will change by this time next year, that your policies won’t make a dramatic improvement, then you might as well rip the band aid off now.

An incredibly bleak appraisal of your confidence in your current strategy or your ability to make the situation better any time soon.

  • Independent: “Lifting eviction ban next year ‘would have clashed with elections” link

Our Future in Friend-Shoring

The shift in the West’s relationship to China is causing a big rethink in the globalisation narrative and strategy. “Get it where it’s cheapest” is being replaced with “Get it where it’s most secure”. Or at least “Get it where it’s cheapest, but have a plan b.”

An element of this is certainly prudent. COVID-19 showed us the vulnerability caused by a single point of origin in our supply chains.

As we move past the simplistic 1990s narrative that “all globalisation is good”, there are two policy narratives vying for dominance:

Onshoring: Bringing manufacturing back home.

Friend shoring: Bringing manufacturing to your country OR to a political ally.

Ireland is poised to be a natural beneficiary from this trend, but it’s not a sure thing. Microprocessor chips are identified as big risk, with the most advanced chips being mostly made in one place – Taiwan.

As the EU and US ramp up big industrial strategies around microprocessor production capacity, our government agencies will be vying for much of it to be based here. The big set-back is that we lost the bid to host Intel’s first 2nm fab a year ago. It’s honestly one of the biggest industrial strategy misses of the decade.

  • Independent: Kildare can be the EU’s ‘chip hub’ if new funding secured Link
  • Science Business: [EU] Chips Act heads into negotiation phase Link
  • Guardian: “From near-shoring to friend-shoring: the changing face of globalisation” Link
  • Irish Times (last year): Failure to secure new Intel plant a ‘tragedy’ for State Link

House Prices Are Falling Everywhere, Except Here

Here’s a snapshot of housing graphs from across the western world. In almost all markets, as interest rates rise, house prices are starting to fall.

This trend is replicating almost everywhere, except here.

Partly this is because, as we discussed last week, mortgages aren’t becoming more expensive here. Irish banks so far aren’t passing interest rate rises on to borrowers, and the Central Bank increased its loan to income ratio in January.

Last week the Taoiseach told his party that we are short about 250k houses. Economist Ronan Lyons thinks this is closer to 300k.

With the cost of mortgages unchanged and so many buyers chasing so few houses, it is understandable why Ireland hasn’t followed the trend yet.

However, there are some signs that Ireland might follow the broader trend. Commercial prices are starting to falter and some investor numbers indicate a diminishing optimism. From the Business Post:

“Irish Life has blocked withdrawals from its €500 million Irish property fund for the next six months following a recent spike in the number of requests by investors seeking to get their money back, the Business Posthas learned.

The insurance and pensions company confirmed to this newspaper that it has closed the fund until at least the end of August as it seeks to liquidate some of its property portfolio in order to pay for future investor withdrawals.”

  • Business Post: Irish Life blocks withdrawals from €500m property fund as investors rush to exit Link (€)
  • Business Post: Irish property funds book writedowns of €240m as commercial market turns Link (€)
  • Independent: Number of house completions this year set to remain ‘substantially below’ estimated need Link

Digital Innovation Hubs

As part of an EU backed network, Ireland is going to have four “Digital Innovation Hubs”, two of which were announced recently. Although this announcement comes through Enterprise Ireland, which is tasked with creating new, high growth exporters, they are best understood as improving the technology of small domestic companies. This is less sexy sounding, but given the large productivity gap between domestic companies and multinationals, it’s very important for us that initiatives like these succeed.

  • RTE: Government announces two new European Digital Innovation Hubs (link)

Silicon Valley Bank

SVB, a large regional bank in the US, suffered a bank run late last week. It didn’t manage its risk well, and as interest rates rose throughout the year last year, the market value of some assets it held dropped. This meant that the value of the things it owned/was owed were less than the total amount of money it owed (including to depositors). When people realised this, they got spooked and withdrew their money. The US Government, in a very professional and orderly manner, took over the bank, burned the bondholders, managers and shareholders, but promised to make all depositors whole.

The prompt and confident response by the US Government should stop the spread of panic and contagion, but it does beg the wider question of what exactly a deposit bank should be in our modern economy and what level of risk they should take on.

  • Irish times: Collapse of Silicon Valley Bank will be watched closely Link

📊 Public Opinion

Research and Data on people’s economic beliefs.

What worries our neighbours? In the UK, the Economy and Inflation remain the top concerns for voters, replacing the NHS after a winter spike in January. Link (IPSOS)

As the graph above shows, “Economy” has been consistently high since the outbreak of COVID-19, but inflation climbed steadily throughout 2022, peaking in the winter. Zooming in and zooming out, worries about the economy are at the highest sustained levels since the great financial crisis.

Worries about inflation haven’t been this high since the 70s, though they seem to be on a downward trajectory.

Interestingly, the worries about the Economy and Inflation are roughly equal within all demographics (e.g. rich people care equally about both, but at different levels to other demographics) except in voting preference, where Labour voters care 10pp less about Inflation than the Economy.

Disclaimer: I write this newsletter as a hobby, in a purely personal capacity. None of the writing expresses the views or opinions of my employer.