‘Merc index’ reveals a stitched-up housing market
Few songs capture the power of branding, commercial manipulation and consumer yearning like Janis Joplin’s Mercedes Benz. With her opening lines “Oh Lord won’t you buy me a Mercedes Benz”, Joplin sums up the “arms race” nature of modern consumerism whereby one purchase, in this case her friends buying Porsches, has to be cancelled out by her getting a Mercedes Benz.
Shopping détente is maintained by mutually assured consumption. As in the cold war, where each new Nato warhead had to be matched by a Soviet one, in a consumerist society, each person’s purchase throws the gauntlet down for the next person to match or exceed it, leading to an escalating inferno of debt, unwanted trophies and positional angst where enough is never enough.
As Joplin noted in the 1970s, nothing symbolised you had arrived quite like a Merc, kicking off a chain reaction goading the next arriviste to go one better.
As a boy I remember marvelling at the powerful girth of the Mercedes saloon. No one on our road possessed such a thing.
However, I did have a relation, who made and lost a quid or two. When his various tills began to ring, the first thing he bought was a Merc, signalling that here was a man of wealth and taste. Few things betokened success quite like the sight of the iconic, three-pronged Mercedes star adorning your radiator grill.
The Merc wasn’t merely symbolic; it was hugely expensive. In 1973, the year Ireland joined the EEC, a new Mercedes set you back more than the average new house.
If you find this hard to believe, let me take you back to a wonderful article on prestige cars in this paper from February 13th, 1973, entitled, the “The executive car from A to Z”.
“M is for Mercedes, beloved of ministers and boardroom bosses. Mercedes-Benz cars are very, very expensive, but they do well here, and the market share is well over 1 per cent. The 230 Automatic, which is the transport for ministers and parliamentary secretaries, is a mere £4,210. For the business barons there is the 280 model at £5,250.”
A cool £4,210 for a standard Merc might not sound like a lot, until you compare it with the price of houses at the time.
Okay let me fess up now – this article is not about Janis Joplin, The Rolling Stones or indeed The Clash (but if you have spotted references to these bands, then at least you are not asleep!).
The Merc wasn’t merely symbolic; it was hugely expensive. In 1973, the year Ireland joined the EEC, a new Mercedes set you back more than the average new house
It is about the ridiculous rise in house prices in Ireland relative to other prices, resulting in a crazy situation where, in a land of builders, people can’t afford houses.
Let’s examine these relative price moves. Taking The Irish Times property section in the same week of 1973, we can see the price of houses in upmarket areas of Dublin and Cork. A four-bed in Beech Park Avenue, Foxrock, cost £12,500. In Dalkey, on Saval Park Road, a bungalow would have set you back £13,000. Another four-bed, semi-D in Dalkey was on the market for £9,000. A four-bed in salubrious Greystones was asking £13,500. In Cork, a Victorian home on the Blackrock Road was seeking £4,000.
When expressed in Merc terms, we see that the Merc cost £4,250, which is more than the property in Cork. On average, two and a bit Mercs cost the same as a family home in suburban south Dublin, Ross O’Carroll-Kellyland.
Now look at today’s prices, and factor in some euro conversions.
In 2019, a standard Mercedes-Benz E220d AMG-Line estate retails at ¤55,420. This means the price of the Merc has gone up about 10 times since 1973, which seems like quite a bit until you examine what has happened to house prices over the same period.
This week, a house which cost £12,250 in 1973 on Beech Park Drive in Foxrock is asking ¤760,000. If we priced houses in Mercs rather than euro we see an extraordinary relative increase in the price of Irish houses relative to the most enduring symbol of German engineering. In the 1970s, the ratio of Mercs to houses was about three to one. Today it is 14 to one. In real terms, whereas Mercs have increased in price by about 10 times, house prices have gone up by almost 50 times.
Houses similar to those 1973 homes are on sale today but, in Merc terms, they are massively overvalued. For example, 17 Wyvern, Killiney Road, Dalkey, a four-bed bungalow is asking ¤775,000 (or 14 Mercs). St Judes, 25 Corrig Road, Dalkey, at ¤850,000 is 15.5 Mercs. Number 1 Olney Grove, Terenure, another four-bed semi-D will set you back 15 Mercs.
So, the relative price of Irish houses has gone up by multiples of the price of that most-desired of cars. It’s not that the Merc has become any less coveted than it was when Janis Joplin yearned for one. It is still a premium car and one at the upper end of the price scale.
The difference is that the Merc is a traded good, sold in the competitive international market, where its price is determined by competitive international forces.
The Irish housing market, on the other hand, is stitched-up, protected by ludicrously restrictive planning laws, interfered with to the point of madness and bloated by a generation or two of credit, resulting in a hoarders’ charter which enables land owners to sit on land without penalty and simply watch their wealth accumulate.
This illiquid wealth can be made liquid without having to sell, because the banks accept land, and almost exclusively land, as collateral – rendering the illiquid liquid. This is how the wealthy get really wealthy.
Egregiously too, this liquidity includes the savings of a desperate generation locked out of the market by the very high prices that make the idle hoarders rich in the first place.
Janis Joplin introduced her song Mercedes Benz with the words, “I’d like to do a song of great social and political importance”. Once again, this brilliant young woman not known for mincing her words hit the nail on the head.