Monday, January 28, 2008

Many more home owners at debts door in Ireland

The Irish housing market after a decade of boom, has been stuttering for over a year now. I just know where I live in Ashbourne, many houses have been on sale for months. The first crack in the market came when Michael McDowell promised in October 2006 that if the Progressive Democrats were re-elected to Government they would reform the stamp duty regime. That was for many people, including myself a good reason to put house buying on hold. As a first time buyer, the prospect of buying without stamp duty and saving €1,000s was very attractive. So almost overnight a market that had been on fire, cooled considerably.

The most recent housing statistics from the Department of the Environment show the amazing decline from 35,000 loan approvals for houses in the second quarter of 2006 to just over 20,000 in the third quarter of 2007. In response to pressure the Government did eventually abolish stamp duty for first time buyers in June 2007 to stimulate the market, but by then the full extent of the American sub-prime crisis became known. And even further reform in Budget 2008 has failed to have the desired effect.

As you can see from this US TV report by CBS, the housing market there is going through a tumultuous time. Of course we have to be concerned about the impact of the sub-prime crisis on the global economy, but I think we also need to be concerned about the thousands of home owners and families who have lost or will lose their homes.

And while it is not as bad here, the number of foreclosures and repossessions is rising as reported in the Irish Independent today, trebling in number since 2004. As reported here, some consumers who were given loans by sub-prime mortgage providers are given very little chance to work their way out of difficulty and are loaded with charges and fees that make repossession the most likely outcome. While sub-prime lenders will now be regulated by the Financial Regulator from Friday next, that would appear to be too late for those who took out mortgages before then. Will the lessons of this disaster be learned, hard to say, but I hope so.

The market is still very slow given that many house hunters in my view believe that house prices are over valued and are waiting for them to fall further. The prices in some areas did come down, I took a chance and bought a house last autumn, the final price I paid was down about 30k. However given how bad the market is, I am surprised that prices have not come down a lot more.

When they do, there is a ready market there as reported last week when a builder slashed the prices for new houses in North Dublin and most of them we bought within hours. The Construction Industry Federation are very quick to lecture the Government on what needs to be done to stimulate the market, however if their members who have made zillions in the last decade were willing to cut prices to reflect the reality in the market, first time buyers may start to buy again. And for me the most important part would be that house prices would become affordable again for many people currently shut out. I have sympathies for private sellers in the second hand house market who are holding on for the best price given that many of them would be in a negative equity situation if they reduced the asking price too much. But the builders and property developer could afford to reduce prices and take some of the pain, but I won't be holding my breath.

Unless prices fall and perhaps interest rates come down significantly I think the housing market will continue to stagnate for all long time, which is bad for those trying to get on the property ladder, bad for those dependent on the housing sector for their employment and income and of course bad for the Government coffers and economy.

Sunday, January 20, 2008

Is Yellow Book the answer to our yellow pack customer service culture here?

I had the pleasure of spending the New Year holidays with my good friend Didi and his girlfriend Ana in Moscow and in the course of our discussions they were asking me about my new role. I was telling them that apart from high prices here, poor customer service or what we could call "yellow pack" customer service was a big problem. We know from a Eurobarometer survey in 2006 that 35% of Irish consumers were unhappy with the manner in which their complaint was dealt with, and of those almost half didn't take any further again. I imagine in most cases, people were just fobbed off and worn down until they just gave up.

Ana was telling me about the system in Portugal, its called the "Yellow Book". If you have a customer complaint and are not getting anywhere about a public service, retailer, restaurant, bank, basically any goods or service provider you can request the "yellow book". Here is some information on line about the "Livro Amarelo". (I know it is in Portuguese, but if you use an online translation service, it gives you the gist of what it is about). But basically all public authorities/providers are required to have this book by law on the premises, you fill out a form which is in triplicate, one copy for you, one for the provider and one which goes to the public authority responsible for addressing the complaint.

Ana told me that the request for the yellow book doesn't normally go down too well, its almost like an insult and I can imagine why. She has experience of being told that the yellow book has been abolished or that they can't find it. Anyhow in a lot of cases the threat of the consumer looking for the yellow book generally moves the provider to take the complaint more seriously.

It struck me as a potential solution to some of our customer service problems. The reality is that we give consumers rights, but not the means to enforce or at least we make it very difficult for them to seek redress. We go to a bank, shop to restaurant or call a customer care line and we are unhappy about some issue, but cannot seem to get them to take our complaint seriously or sort it out. We are angry and determined to do something about it. But then by the time we find out what to do, where to go and how to do it, we have lost the will to live or do not just have time to sit down and draft that email or letter which may just end up in another black hole. However with the yellow book, you make the complaint there and then on the premises or online, no need to write a letter, spend hours on a so-called customer care line when all the details are fresh in your memory.

Its certainly a system I plan to follow up and look into further. Of course not saying this is a panacea, but the basis of a solution. Lisbon is a very agreeable city and this is an excellent excuse to travel there. It would also address an issue in that the consumer protection landscape is complex, there are a plethora of different systems, agencies, bodies with responsibility for adjudicating on consumer complaints. The yellow book could be the solution in that consumers don't need to know where to go, they just need to fill in the details in the yellow book and the complaint goes to the relevant authority automatically, so if it is about food safety it goes to the Food Safety Authority of Ireland, about financial services, the Financial Ombudsman and so on. That's the theory anyhow, might be worth trying to see if it works in practice here.

Of course you could also take a more extreme route. This guy after months of trying to get a complaint with BT solved uploaded it to You Tube and got the required results. See

Sunday, January 13, 2008

Food for thought.

We are all too familiar with the high prices here in Ireland, especially when we compare them with prices when away on holidays in other countries. A survey by Eurostat last year found that food prices here are at least 25% above the European average. Bread and cereals are 21% dearer, meat is 29% more expensive and fruit and vegetables prices are 30% higher.

So what is the hard pressed Irish consumer supposed to do to cut their grocery bills. Well apart from looking at the cost of food, perhaps consumers need to look at what they buy and actually what they eat and throw away. A UK study earlier this year found that households there threw away about a third of all the food they bought.

I know myself when I am in a hurry, I rush around the supermarket to buy one or two items as I have nothing in the house to eat. I forget to write up a shopping list and somehow end up with a lot more than I planned. It seems that many of us are especially fond of those special offers. The 3 chicken breasts for the price of 2 offers, even though we are not sure we need them, they just seem like great value. Five days later in many cases we end up throwing out all that extra stuff out because they have gone past the sell by date. And while many consumers are getting more price sensitive, very few of us are really conscious of the cost of the stuff we throw away. One way to counteract this is to draw up a list of what you need before you go shopping and perhaps also take note of what you throw away. That way you can avoid buying what you don't need and keep track of items you buy but often throw out. Action here is not only good for the pocket, but for the environment too.

Basil the Rat-Fawlty Towers mix version.

Apart from high food costs, consumers are also concerned about food safety, so it was disappointing to hear this week from the FSAI that the number of food safety enforcement orders increased by 54% in 2007. The official health statistics show that a few thousand people suffer from food poisoning each year, although the real figure is probably much higher given many cases go unreported. We also know that some people die as a result of food poisoning, so this is a very serious issue. Many food retailers and businesses operate to very high standards, well beyond the minimum standards set down. However these figures show that there are some who play loose and fast with the health of their customers.

I commend the work of the Food Safety Authority and HSE in investigating and where necessary prosecuting, closing down and naming these food outlets, which not only endanger the health and lives of consumers, but damage the food industry in Ireland. We all laughed at Basil the Rat in Fawlty Towers, buts it not so funny when you get food poisoning.

Sunday, January 6, 2008

Government inspired inflation coming to a bus and rail station near you!

Well I suppose we are now six days into the New Year, so I should have expected news of Government sanctioned price increases by now. So to prove their efficiency, low and behold along they come, unlike the buses on time every January.

The Sunday Business Post informs us that the Department of Transport (not that there is any mention on their website as of this morning to that effect)has sanctioned fare increases on bus and rail services of up to 10% across the country. This of course is shockingly hypocritical in light of their statements on the need to tackle inflation. On top of these price hikes, many rail commuters are also facing new and increased car parking costs at stations. Recent figures from the CSO showed that more people are driving to work and less travelling on the buses in 2006 compared with 2002 and this price hike will only add to that.

I am reminded of this Fast Show sketch when I think about Government policy on inflaytion!

Public transport costs are one of the key areas where Government has the power to control prices and despite the fact that last June the Government hosted an anti-inflation summit to demonstrate its commitment to keeping pieces and costs down, it has year after year sanctioned increases in public transport fares. But of course, this is all easily explained. The Consumer Strategy Group report in 2005 highlighted the Governments’ conflict of interest, in that it is both the owner and regulator of the CIE group of companies, therefore it has the option of investing more in public transport and keeping costs down or it can pass the increased costs onto the consumer. And of course the latter argument always wins out, that if there is ever any argument of course in the first place.

And speaking of this Anti-Inflation summit when it was convened inflation was 5% and six months on it is still 5%. With the most recent inflation figures from the CSO showing that transport costs were the second largest contributor to inflation after food and drink prices in November 2007, it would have been sensible public policy in relation to reducing inflation, traffic gridlock and CO2 emission to freeze public transport fares. However at the moment, having the Government in charge of tackling inflation is a bit like having Tony Soprano in charge of crime reduction, they may know a lot about it, be responsible for a lot of it and have no interest in but reducing it.

I have to declare an interest, I am a daily Bus Eireann commuter from Ashbourne to Dublin myself. In general the service is good, but the cost is already steep at €5.75 daily return, so another 5-10% on that and I am really beginning to I feel that the Government wants me to go back to my car.

What we need is an independent transport regulator as proposed almost 3 years ago to set prices taking the needs of consumers into account along with increased competition to give consumers greater choice and to keep prices down.

Saturday, January 5, 2008

Cowen-Could he become the Darling of Irish Depositors?

Yesterday the Chancellor of the Exchequer in the UK, Alistair Darling announced new measures that will increase the levels of protection for bank deposit holders from £35,000 to £50,000. This is in response to the crisis created by the near collapse of the Northern Rock (or Northern Wreck as it soon became known) in September and the sight of thousands of deposit holders queueing to withdraw their savings both in the UK and in Ireland. Thats very good news for savers in the UK, but what about here. The protection available to depositors here now falls well below the level which British consumers are entitled to, which in euro terms is just under €67,000. At present only €20,000 of depositors' savings are guaranteed here.

In October 2007 in response to Dáil questions (questions 98/122 October 16) the Tánaiste rambled on about a review at EU level and a report that will be published on the issue in mid 2008 which bore all the hallmarks of kicking this into touch. Our current scheme meets the minimum levels agreed by the EU member states, but there is no reason why Ireland cannot follow the UK example and greatly enhance the protection which savers have. As far as I am aware this doesn't even require legislation, it only requires amending the existing statutory instrument to reflect the new amounts. Of course there would have to be consultation with the banks who fund the scheme, but I am sure they would welcome anything that would maintain consumers confidence in the banking system and avoid a repeat of the scenes we saw outside Northern Rocks offices last year.

CAI will be writing to Brian Cowen calling on him to increase the levels in line with the UK.