‘Merc in­dex’ re­veals a stitched-up hous­ing mar­ket

The Irish Times - Weekend Review - - NEWS | REVIEW - David McWil­liams

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.

Spi­ralling ra­tio

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.

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