Sales of household goods soaring, despite housing shortage
- Disposable income up by 5.6% for the first half of 2017
- Continued growth in consumer spending expected, with 2.8% forecast for 2017
- The drop in the value of sterling due to Brexit enhancing buying power
- Consumer confidence significantly higher than in the UK and the rest of Europe
Dublin, November 13, 2017: Despite the current housing crisis, spending on household goods is up by 12.7% this year, making it the highest growth sector of retailing in 2017. Spending on household goods has been growing significantly for the last four years, and forecasts predict that 2017 may even surpass the performance achieved in 2016.
These are some of the findings of the latest Consumer Market Monitor (CMM), published today by the Marketing Institute of Ireland and UCD Michael Smurfit Graduate Business School. Data from the Q3 2017 Monitor indicate that Irish consumers are spending on many types of goods and services, but especially on household goods.
“The signs are positive for continuing growth with indicators such as population, employment, and rising incomes. The drop in the value of sterling is another significant factor enhancing buying power. The strength of demand is most evident in the housing market where mortgage approvals increased by 41% in Q1, and the number of homes purchased was up by 8%, despite a shortage of supply. All types of household goods are all growing very strongly,” according to Professor Mary Lambkin, author of the report.
“The continuing growth in employment is leading to a substantial increase in the amount of disposable income circulating in the economy. In fact, disposable income reached €95 billion in 2016, not far off the 2007 peak of €102 billion. The growing population coupled with the increase in employment and rising income are driving a strong increase in disposable income, which is positive for Irish marketers,” said Tom Trainor, Chief Executive of the Marketing Institute of Ireland.
Sales of household equipment have been growing rapidly since 2014, and have been the highest growth sector of retail for several years. The volume of retail sales, which represents real growth, has grown rapidly since 2014, and is now well ahead of the last peak in 2007.
In contrast, the value of sales is still 27% below the peak level, suggesting that prices are still significantly lower than they were in the last boom.
Some of this pick up is driven by new homes, with purchasers having to equip them from scratch. The lowest point was in 2013 when only 8,300 new homes were connected, but this has increased each year since, with 14,932 new homes connected in 2016, all of which would have required equipment and furnishings. Based on information to the end of September, it is expected that the number for this year will be about 15,450 in total, which is only a 3% increase on last year.
The Home Renovation Incentive
The Home Renovation Incentive (HRI) scheme has also stimulated a lot of spending on household goods, as well as being a considerable support for the building trades and related retail sectors. There have been 101,232 projects completed under this scheme since its introduction in October 2013, with a gross spending value of €1.6 billion. 10,655 building contractors have been involved in these projects and, given a multiplier of 2-3 for the number of trades contributing to these projects, that may have supported as many as 30,000 jobs.
Types Of Household Equipment
Household equipment is the sum of three categories of household goods: furniture and lighting; hardware, paints and glass; and electrical goods. While all three categories are now experiencing growth, the level of growth has varied considerably. Electrical goods recovered fastest from the recession and are now 42% higher in volume than at the last peak in 2007. Despite being slower to recover, furniture and lighting comes next is now growing at the fastest rate, up 16% for the year to the end of September, slightly above the last peak.
The weakest category, relatively speaking, is hardware, paints and glass. This category’s close tie to construction explains why it has been slowest to recover. However, it has picked up noticeably this year, up by 9% in volume terms for the year to the end of September.
Unlike the retail sector, the property sector continues to face unprecedented shortages, with housing demand of at least 30,000 units per annum currently. Although the evidence suggests that construction activity is picking up, it will be a number of years until supply catches up. A range of indicators, planning permissions, commencements and the Construction Purchasing Managers Index, point to a rapidly expanding sector, albeit off a low base.
The number of residential property sales is also picking up, despite the tight supply. 33,096 sales have been recorded up to the end of September, up 10%, signalling a total of 50,000 for the full year.
Every house purchase, whether new or second hand, provokes some spending on household goods, everything from paint and paper, to furniture and fittings. Lending for house purchase, and top-up loans for home renovations is also growing fast. Mortgage approvals for home purchase were up by 34% in the first nine months of 2017, for a total of 24,102, and top-up mortgages were up by 52% suggesting more spending under the home renovation scheme.
Despite the housing supply crisis we continue to face, the market for household goods looks to be in for a positive future.
About the Author
Mary Lambkin, is Professor of Marketing in the UCD School of Business where she teaches courses to undergraduate and postgraduate students and is involved in a range of research projects under the general heading of marketing strategy. She has written extensively on this subject in academic journals, and also writes commentaries on marketing topics of contemporary interest for professional publications. She has served as Head of the Marketing Group, as Dean of the UCD Business School and as a member of the Governing Authority of the university at various times, and also holds a number of positions in companies and professional organisations outside the university.
About The Marketing Institute of Ireland
The Marketing Institute is the professional body for Ireland's marketing people. It exists “to enable marketers to build great brands and great careers”. It does this by sharing best practice, insights and expert content, building the community of marketers, and aiding marketers in career progression. The three themes of content, community and career underpin all Institute activities. The Marketing Institute also owns and operates the All Ireland Marketing Awards, the CMO Summit, and DMX Dublin, Ireland's largest marketing conference.
About UCD Michael Smurfit Graduate Business School
University College Dublin became one of the first universities in Europe to offer the degree of Master of Business Administration (MBA), starting in 1964. In 1991, the graduate business school opened its own campus in Blackrock, County Dublin. With over 100 faculty members, 1,400 students and 70,000 alumni worldwide, UCD Smurfit School is one of a small number of business schools worldwide to hold triple international accreditation (US - AACSB, European - EQUIS and UK – AMBA). The school’s programmes have been consistently ranked among the leading European business schools by the Economist and Financial Times, since 2000.