Business News

Card spending continued to rise in second quarter

Card spending continued to rise in second quarter

Almost €19 billion was spent on Irish credit and debit cards between April and June, according to the Central Bank.

That represents an 8% rise year-on-year, as consumers increasingly opted for cards instead of cash.

The vast majority of card transactions in the second quarter – more than €16 billion worth – were done with debit cards. That is up 8.9% on the same period of 2018.

Most of that increase came at the point of sale, with transactions there rising by 13.4% to €10.96 billion year-on-year.

At the same time ATM withdrawals stayed broadly flat at €5.4 billion.

Meanwhile credit cards accounted for almost €2.9 billion of transactions in the period – an increase of 3.7% on the second quarter of 2018.

According to the Central Bank almost €5.2 billion worth of card transactions between April and June went towards online purchases, an increase of 15.8% on last year.

It came as the number of cards in issue rose by 4.4% to 7.2 million at the end of June. Almost 5.3 million of those were debit cards, while the number of credit cards rose to 1.91 million.

However the number of active cards in Ireland rose by a slightly more modest 3.9% to 6.1 million.

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Committee recommends broadband network remain in public ownership

Committee recommends broadband network remain in public ownership

A report carried out by the Oireachtas Committee on Communications has recommended that the broadband network infrastructure remain in public ownership.

The committee carried out an investigation into the Government’s decision to award preferred bidder status on the multi-billion euro national broadband contract to Granahan McCourt.

The aim of the project is to deliver high speed broadband to 540,000 households, farms and other businesses.

The Government has said the contract for the National Broadband Plan will be signed later this year.

In the report, the committee has recommended that the Government commission an external, independent review on whether its proposals and the costs are the only viable option.

It also says a new cost-benefit analysis should be carried out before the final national broadband contract is signed.

The committee also says the Government should re-engage with the ESB to examine the best model for delivery of a new plan through the ESB.

The report concluded that the original terms of the tender were too narrow.

It found that the lack of research into the actual cost of the final project proved to be a structural flaw and it said this lad to bidders withdrawing.

The report says Granahan McCourt will recoup its money within seven to eight years and retain full ownership, while at the same time the State will have invested almost €3 billion with no ownership rights.

The report also raises concerns over just one State representative being appointed to the board of the new National Broadband Ireland group overseeing the plan.

It said the committee accepts that changing the final bid so that ownership of the network is retained by the State may require a slight delay to the signing of contracts.

However, the report says there should be no reason why this could not be achieved in a much shorter period than has been suggested.

The Department of Communications says it will consider the committee’s report when it is published.

A Government source said the recommendations in the report would mean abandoning the current process and starting again, which it said could take years.

Earlier, Fine Gael TD and committee chairperson Hildegarde Naughton had called members to support her recommendation for the Government to press ahead and sign the contracts as soon as possible.

She said there was no evidence that indicated any reliable, cheaper alternative to the NBP.

Green Party leader Eamon Ryan was seeking cross-party support to ensure State ownership of the network.

Fianna Fáil’s Timmy Dooley said he was concerned that the operator would recoup its money after seven to eight years carrying very little risk and will retain full ownership.

TDs and senators also echoed concerns contained in the report over just one State representative being appointed to the board.

Sinn Féin’s David Cullinane said Eir’s claim that it could provide the NBP for less than €1bn was unproven.

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Average monthly rents hit record level for 13th quarter in a row – report

Average monthly rents hit record level for 13th quarter in a row – report

Average monthly rents across the country rose to a new record level during the second quarter of the year.

According to the latest quarterly Rental Report by Daft.ie, on average the cost of renting is now €1,391 per month.

The increase marks the 13th consecutive quarter of record rents.

However, the 6.7% rise over the same quarter last year is the lowest rate of rental inflation recorded since the last three months of 2013.

Nonetheless, the average listed rent per month is €361 higher than the last peak 11 years ago.

Ronan Lyons, economist at Trinity College Dublin and author of the report, said the moderation in increases was more likely due to limits on affordability, rather than improvements in the supply of rental properties.

“Availability on the rental market remains at levels that were unprecedented prior to 2015,” he said in a statement.

“For example, in the Dublin market, there were just 1,541 properties available to rent on August 1st. While that’s up from 1,121 two years ago, it’s well below the average of 4,700 for the preceding decade.”

According to Daft, the slowdown has been principally driven by the capital, although other main cities have also seen inflation rates moderate too.

In Dublin, rent growth in the last quarter was 4.5% compared to a year earlier, bringing average rents to €2,023 a month.

That compares to an annual inflation high of 13.4% in mid-2018.

While in Cork they were up 7.9% year on year to a monthly average of €1,366.

Limerick rents climbed 10.5% over the past 12 months to €1,225 a month, just ahead of the average increase in Waterford of 10%, bringing average rents each month there to €1,013.

The highest rent inflation was recorded in Galway, where rents during the last quarter were 15.5% higher compared to the same period a year earlier.

Mr Lyons said the construction of up to 25,000 new rental units in the next few years would certainly help moderate the situation further.

However, he said that not only do policymakers need to target the inflation, but they also need to bring rents down to an affordable level.

Commenting on the report, the Irish Property Owners’ Association said the report shows the availability of rental property is disturbingly low.

“The private rental market is shrinking rather than expanding, Rent Pressure Zones are a blunt instrument and do not take into account the level of rent being charged or the indebtedness of a landlord, making it uneconomical for some landlords to continue renting property,” said Stephen Faughnan IPOA Chairman.

“The State needs to protect the existing supply of accommodation as well as incentivise further investment in the sector.”

Minister for Housing, Planning and Local Government, Eoghan Murphy, said rent pressures and the insecurity this is causing for people is very much a priority for the government because rents are still too high.

“It’s worth pointing out that the period covered in this report was before the significant changes introduced in the Rent Reform Bill earlier this year and passed in June,” he said.

“These reforms strengthen rent pressure zones considerably, remove a number of opt-outs, and give new legal powers and resources to the RTB to enforce rent controls.”

“Separately to this we are seeing a continued increase in purpose built student accommodation, which is positive for students, but also in terms of freeing up houses and apartments in other parts of the rental sector.”

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Stock markets higher on hopes for stimulus, trade progress

Stock markets higher on hopes for stimulus, trade progress

European shares are up for the third straight session, building on a recovery since late last week. Shares in Asia also rose in overnight trade.

Global stocks rallied at the start of the trading week on rising optimism about stimulus measures in China and Germany as investors welcomed more conciliatory signs in the long-running US-China trade war.

Germany’s central bank, the Bundesbank, warned that Europe’s biggest economy could enter a recession in the third quarter, a statement that further fueled expectations that a stimulus program would be coming.

Market watchers also expect further stimulus measures by China to boost growth.

They’re confident too that Federal Reserve Chair Jerome Powell will communicate dovish direction at a big central bank gathering at the end of the week in Jackson Hole, Wyoming.

Analysts also cited the Trump administration’s decision to delay by 90 days a ban on US companies doing business with Huawei.

The move is seen as a conciliatory step in the running US-China trade fight and coming on the heels of statements from US President Donald Trump and other top administration officials emphasizing efforts to revive talks with Beijing.

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Threshold, USI call on Govt for scheme to protect rental deposits

Threshold, USI call on Govt for scheme to protect rental deposits

The Union of Students in Ireland and national housing charity Threshold have called on the Government to immediately implement a Deposit Protection Scheme (DPS) in order to safeguard rental deposits.

Both organisations say that such a scheme is needed to protect tenants in the private rented sector from scams.

According to Aideen Hayden, Chairperson of Threshold, the scheme was initially promised in the 2011 Programme for Government and successive Ministers for Housing have agreed to its introduction.

She called on the Government to establish a legal definition of rental deposits; to limit rental deposits to the value of one month’s rent and to implement the DPS which, she says, would see deposits lodged with an independent third party such as the Residential Tenancies Board.

The RTB’s annual report last year showed that in four out of five disputes the deposit was either fully or partially awarded to the tenant.

“A Deposit Protection Scheme, in which deposits would be guarded by an independent third party, would inevitably lead to less of these kinds of disputes,” Ms Hayden said.

Similar schemes are in place in Northern Ireland, England, Wales, Scotland, New Zealand and Australia.

Tenants’ rental deposits are lodged with an independent third party and returned to the tenant directly by this third party.

It is guaranteed that the deposit will be returned to the tenant as long as they have met the terms of their tenancy agreement which means the deposit will be safe even in exceptional circumstances like when a landlord or letting agent goes out of business.

Average monthly rents hit record level for 13th quarter in a row – report

Ms Hayden said: “We ask the Government to honour its commitment to re-examining the laws around rental deposits, which urgently need to be strengthened in order to increase protection for tenants in the private rented sector.

“There are vulnerable people in tenancies all over the country who are on the margins of homelessness and simply cannot afford to lose their deposits.”

Despite passing legislation to introduce a deposit initiative in 2015, the Government has yet to initiate the scheme.

Meanwhile, USI President Lorna Fitzpatrick has said that many third-level students are relying on the private rental sector for a place to live while attending college, due to a shortage of student accommodation.

“These students are already struggling to afford their college fees and rent, particularly those reliant on SUSI maintenance grants, and they are a group that is especially vulnerable to fraud and scams,” she said.

“A Deposit Protection Scheme would minimise their exposure to rental fraud and would also be of benefit to international students who may have to return to their home country without securing a return of their deposit.”

A spokesperson for Minister for Housing Eoghan Murphy said he does not oppose setting up such a scheme but it cannot impose an extra charge on tenants or landlords, and so must be self-financing.

The spokesperson said there had been significant changes to the rental market since the 2015 scheme was first envisaged.

“The draft scheme was originally intended to be financed by the interest payable on deposits lodged; this is no longer viable, given current financial market conditions.

“Furthermore, it is noteworthy that disputes relating to deposits are no longer the most common dispute type referred to the RTB,” he said.

Threshold said the introduction of a deposit initiative would further reduce the number of disputes referred to the RTB and have a knock-on saving to the State.

The Property Services Regulatory Authority also warned students and parents against bogus letting agents and fraudulent scams.

CEO Maeve Hogan said: “Our advice to potential students – and their mothers and fathers and guardians to help their offspring off to college on a positive note – is to make sure that they use a licensed letting agent and that’s critical.

She said each letting agent is required to carry an identity licence card and urged students or their parents to see that card.

In relation to scams, Ms Hogan said they get very little complaints but are aware anecdotally of people who are embarrassed after getting caught out.

“If rent is too good to be true, it possibly is too good to be true.”

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New guidelines on mobile and broadband advertising

New guidelines on mobile and broadband advertising

Telecoms operators should not mislead customers by exaggerating the availability, coverage and speed of mobile and broadband services, according to new guidelines.

The new measures around the advertising of mobile phone and broadband services are being introduced by the Advertising Standards Authority for Ireland and come into effect from 1 September.

Included in the rules are a requirement to give greater detail on the availability of a product, particularly in relation to geographical location.

Companies will also have to clearly state when their broadband connection is only partially fibre-based, as opposed to full-fibre networks which are now available in some places.

Meanwhile, the authority is reviewing the use of the word “unlimited” where data limits do exist, and consumers end up paying so called ‘fair usage charges’.

The ASAI says the guidelines will complement its existing code in ensuring that certain marketing terms used by telecommunications operators convey clear meanings that are not misleading to consumers.

“Marketing terms, by their design, are there to attract consumers to buy certain products and are an essential part of business development in the telecoms industry. However, there is the potential to mislead when marketing terms are used incorrectly,” Orla Twomey, Chief Executive of the ASAI said.

“To ensure that the Code will remain, at all times, credible and relevant, the ASAI regularly reviews and appraises the Code, taking account of evolving commercial and societal trends.”

Fibre network operator Siro has welcomed the changes and said it will help remove consumer confusion around products that are advertised as being fibre-based.

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Help-to-Buy may cut higher value homes in Budget overhaul

Help-to-Buy may cut higher value homes in Budget overhaul

The Help-to-Buy scheme could return in October’s Budget but in a heavily capped form that would essentially exclude Dublin homes, the Sunday Independent has learned.

Finance Minister Paschal Donohoe plunged the future of the scheme into uncertainty when he refused to confirm that it would continue into next year.

The scheme provides a tax rebate of up to 5pc on the cost of a newly built property, up to a limit of €20,000. Currently, first-time buyers can claim the rebate on new homes worth as much as €600,000.

It is understood that the Minister is considering reducing the cap to as low as €250,000.

To date, the scheme has cost the State €196.2m over a 28-month period. In its first year, the scheme cost €85.1m.

Reducing the maximum value of suitable homes to €400,000 would cost the Exchequer €60m a year, a €25m annual saving, according to estimates from the Revenue Commissioners.

Such a reduction would essentially exclude new homes built in many parts of Dublin.

The average price paid for a new home in the Dublin City Council area last year was €525,901. In Dún Laoghaire-Rathdown, that figure rose to €648,512.

Should the scheme be limited to homes worth €300,000 or €250,000, it would have an annual cost to the Exchequer of €25m and €10m, respectively.

Either of those would ensure that no newly built properties in the Dublin area would qualify for the tax rebate scheme.

Construction Industry Federation (CIF) director general Tom Parlon said that the impact of the scheme being scrapped would be “nuclear”.

“We don’t have a problem if it was capped and certainly it could come down to €400,000 without having a major impact,” he said.

“It is going to exclude a certain cohort in Dublin and probably Dublin south, but even politically if it came down to €390,000, we could live with it.”

However, Parlon said having the scheme available for properties below €390,000 was “essential”.

The CIF chief said there had been a “slowdown” in the construction sector due to uncertainty around the scheme, Brexit, and difficulties in buyers securing mortgages.

“There was a time when you would have to put your name down in any development in Dublin; now you can walk into any one of them across the county and there are houses there to be bought,” he said.

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Banks claim that tracker scandal cases fall outside of time limit

Banks claim that tracker scandal cases fall outside of time limit

Hundreds of homeowners who believe they were caught up in the tracker mortgage scandal may have left it too late to get compensation, if the banks involved get their way.

According to RTÉ, Financial Services Ombudsman Ger Deering has raised concerns that some of the banks involved in the tracker mortgage scandal are now claiming that complaints fall outside the six-year legal window.

Mr Deering revealed that 103 of 1,141 complaints he received from mortgage holders are currently being assessed as to whether they fall outside the statutory time limit. He revealed there may be even more cases.

“Based on our current experience, I believe that as we progress additional complaints to investigation, there will be more complaints where the statutory time limits will be an issue,” he told RTÉ.

“My best estimate at this stage is that a time limit assessment will most likely be required on over 400 of those complaints.

“Legislation setting out the time limits is so complicated,” he said, adding that “this office in some instances spends at least as much time dealing with assessments relating to time limits as it would in conducting a full formal investigation of the merits of that same complaint”.

Mr Deering said some banks were “rigorously challenging the jurisdiction of this office to deal with complaints where there is a question in relation to whether the complaint was made outside the time limits”.

This is despite an agreement not to raise the issue of statutes of limitations as a defence as part of an agreement between institutions and the Central Bank.

Fianna Fáil TD Michael McGrath said: “Whatever banks are adopting this approach of invoking the time limit and trying to prevent those cases being dealt with, they really need to change.”

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European bond yields fall as markets anticipate fresh ECB stimulus measures

European bond yields fall as markets anticipate fresh ECB stimulus measures

Government bond yields in the euro area are hovering near record lows, reflecting heightened expectations for European Central Bank easing soon and concern about global recession risks.

Ten-year bond yields in Germany and Italy were poised to record their biggest weekly falls since mid-2018, while Spanish 10-year yields, down 23 basis points this week, are on track for their biggest weekly fall since 2016.

The yield on Irish 10-year bonds also fell sharply, shedding 12 basis points this week to stand at -0.129%.

It had reached as low as -0.142% yesterday evening.

ECB policymaker Olli Rehn yesterday flagged the need for a significant easing package in September, sending yields across the bloc to new lows.

Alongside increasing concern about global recession risks, fuelled after the US bond yield curve on Wednesday inverted for the first time in 12 years, this has meant another stellar week for world bond markets where prices have shot up – pushing yields down.

“The underlying concern and drivers such as a recession and the expectation for an aggressive policy response, fuelled by Rehn’s comments yesterday, has given the bond market another boost at already elevated levels,” said Commerzbank rates strategist Rainer Guntermann.

In early trade, most 10-year bond yields in the euro area were flat to a touch lower on the day.

Germany’s 10-year bond yield hovered near a record low hit yesterday at -0.714% and is down around 12 basis points this week.

In Italy, speculation that the ECB will cut rates and unveil other easing measures at its September meeting has helped the bond market recover from sharp selling a week ago after the prospect of a snap election moved back into focus.

Italian 10-year yields are down almost 45 bps this week and were a touch higher today at around 1.36%, still holding near their lowest levels in almost three years.

Analysts also noted a sharp tightening in the gap between swap spreads and German bond yields this week, in a sign that markets were lowering the scarcity premium attached to holding German bonds and positioning for fiscal stimulus in the euro area.

And while many expected bond yields to remain at ultra-low levels, some believed market concern about recession risks – reflected in the inversion of the US 2-10 year yield curve this week – were overdone.

“We don’t see a recession coming ‘imminently’ even though the US yield curve has inverted,” said Fahad Kamal, chief market strategist at Kleinwort Hambros. “Bonds remain hideously expensive.”

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Businesses say Ireland is running out of warehousing space amid Brexit fears

Businesses say Ireland is running out of warehousing space amid Brexit fears

Groups representing businesses have said Ireland is running out of warehousing space as retailers and manufacturers rush to stockpile amid growing fears of a no-deal Brexit on 31 October.

New figures from Savills Estate Agents show warehouses in Dublin have reached over 96% capacity.

A crash-out Brexit could result in new border checks for goods flowing between the UK and the EU.

Some businesses have been put under pressure to stockpile goods and components to avoid shortages in shops.

Owen Cooke, the chairman of transport group Independent Express, which runs The Pallet Network Business, says warehouses are close to capacity.

He says no new warehouses have been built since the collapse of the economy back in 2008.

“The economy has grown; it’s filled up the warehousing and the Brext situation would require dozens and dozens of warehouses like this one to cope with holding goods awaiting clearance and holding additional stock for import traders,” Mr Cooke said.

If the UK crashes out of the EU without a transition period, it could result in the possible interruption of supplies of food, goods and medicines moving through Irish and British ports.

Companies are expected to make efforts to increase their stockpiling between now and the latest Brexit deadline in October.

In the run-up to the last Brexit deadline in March, companies were able to stockpile, but this time around could be different.

Tom Thornton, Brexit spokesperson for the Irish/International Freight Association, says businesses must assess carefully whether they need to stockpile their goods.

He said: “There isn’t a whole lot of capacity there in the market for extra storage so if we try to layer on a whole new level of panic storage for Brexit-related goods coming towards October, there is going to be a huge problem.

“I think people need to stop and think and look at what tariff implications there are on their goods and just ask themselves do they really need to stockpile?”

Neil McDonnell, Chief Executive of the Small and Medium Enterprise Association, says the cost of warehouse space is rising due to the lack of capacity.

“We have no hard figures but we are hearing of not insignificant increases – of 5-10% increases – in storage cost.

“The amount of storage available is finite so it’s natural that there is going to be an element of supply and demand and it is to be expected that prices will go up.”

Mr McDonnell also said the Brexit deadline in October is coming at one of the busiest times of the year.

He said: “Just in the normal run of things you have preparations for Christmas and Halloween stock, so it’s going to be hard on the base case to get any type of storage space if you are a business that needs to get extra storage space.

“Also people have a concern having stocked up already in Q1, there was a significant cost to doing that. A lot of business are reluctant to do that a second time.

“But I think it’s clear from the political atmosphere, it’s more likely we will have a hard Brexit this time that we were in March.”

Meanwhile, Mr Cooke said he was worried about the uncertainty over a potential no deal.

“We would like to think we could prepare ourselves for anything coming down the road but we can’t because we don’t know what’s going to happen,” he said.

“If you talk to senior customs officials or Revenue Commissioners, they can’t – and they’re not in a position – to tell us what will happen.

“Will we have to do an individual customs entry for every shipment from the UK – we don’t know and they are not telling us.”

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