Data


There is no official data regarding negative equity in Ireland in general, nor its geographical distribution.  By mid-2012, once house prices had fallen to 50% of their 2007 values Davy Stockbrokers estimated that more than 50% of residential mortgages were in negative equity.  Consequently, any house bought from 2000 onwards is likely to be in negative equity.

Negative equity is a significant issue because it creates a spatial trap that restricts mobility. Because the value of the property is less than was paid for it, owners cannot sell and move to another property without realising a loss.  This trap has three consequences.  First, it restricts labour market mobility.  Second, it keeps families in homes that may no longer be suitable to their needs.  Third, it restricts the pool of properties available to the market and limits any recovery to first time buyers, those prepared to realise a loss, those whose property is not in negative equity or have investment capital.  All three have social and economic consequences causing hardship and stress and slowing the recovery of the wider economy.

Negative equity is not evenly distributed because it is determined by the price paid relative to present prices and this is largely shaped by when the house was bought.  So where might this spatial trap be operating most perniciously in Ireland?

This is not an easy question to answer given publicly available data sources.  We have been looking at proxy measures and present one here, though it should be noted that it only captures one kind of property in negative equity – houses that were built post-2001.  It does not include secondhand houses in negative equity, nor buy-to-let properties in negative equity (though the latter can be estimated using a same method).

Our solution is to use two Census 2011 variables at the Small Area level. The first variable is the ‘% of housing units built post 2001’.  The second variable is the ‘% of outstanding mortgages in an area’ (i.e., the property has been purchased not rented privately or from a local authority or voluntary body).  These variables are not perfect, but when combined do give us, we think, a reasonably good proxy.

The figure below is a density smoothed scatterplot of the two variables for all 18,488 Small Areas in the country.  Each Small Area has approximately 80-130 households.  We have divided up the scatterplot into four quadrants, one of which is subdivided based on the clear pattern of points, to create six categories that denote different levels of negative equity (category 1 has very low rates of both post-2001 build and outstanding mortgages), which we have then mapped from the country and for Dublin.

negative equity

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Map_NegativeEq_Dublin

It is important to note that all the Small Areas potentially have some households in negative equity, but that some areas have greater concentrations than others.  In broad terms, categories 5 and 4 are likely to have similar levels of private residential negative equity, but we have left them separate to denote their different characteristics.

When these categories are mapped the pattern that emerges is perhaps what one would expect.  The areas with the highest concentrations of negative equity are in the outer suburbs of the cities and the fringes of commuter towns.  These areas experienced high rates of newly built properties and new household formation all through the boom, but especially in the latter years when the inner suburbs became too expensive for first time buyers and those trading up to a family home.

This pattern is very clear around Dublin, Cork and Limerick, but is slightly different around Galway, where a number of rural Small Areas are highlighted where there was a lot of one-off housing and small nucleated settlement.  This pattern is repeated for many smaller rural towns.

Owner occupiers in these areas are more likely to be spatially trapped, though as noted any individual household in any part of the country could be suffering such a fate.  It is also likely that the same areas will have higher concentrations of mortgage arrears, given that negative equity and mortgage arrears are related.

Whilst further research is needed to refine this analysis it does give a proxy measure of one kind of negative equity in the absence of detailed data from mortgage providers.  We would be interested in any feedback about the approach taken.

Rob Kitchin

Following on from my earlier post on developing scenarios for Ireland’s future, last week saw the publication by the CSO of new regional population projections for Ireland. The latest CSO projections present how the population of the regions may evolve under different scenarios by making assumptions about future trends in migration (both internal and external) and fertility.

In the context of regional development in Ireland, this latest release from the CSO is crucial as all current regional planning policy together with the settlement strategies of all local authorities are currently based on population targets (including those of ‘Gateways’ and ‘Hubs’) originally derived from the previous set of population projections issued by the CSO in 2008.

The CSO projects that, if internal migration patterns return to the traditional pattern last observed in the mid-1990s, the Greater Dublin Area (GDA) will continue to see its population significantly increase by just over 400,000 by 2031 which will account for two-thirds of the total projected population growth in the State over this period. As observed in the post below, this pattern appears  not only to be re-emerging but rapidly intensifying as the Government increasingly focuses its attention on a FDI led job creation strategy which favours agglomeration economies i.e. Dublin and to a lesser extent Cork and Galway.

Chart

In a marked change from the 2008 release, which projected that the population of Dublin would decline by just over 100,000 and that of the Mid-East increase substantially by over 350,000, the population of Dublin is now projected to increase by between 96,000 and 286,000 depending on the scenario applied, while the population of the Mid-East is set to increase more modesty by between 78,000 and 144,000. These trends would have profound implications for spatial planning, housing policy and infrastructure delivery in the capital.

While all regions are projected to experience net population growth, apart from Dublin and the Mid-East all regions will lose population to internal migration and population growth will be primarily driven by natural increase (i.e. birth rate). This will be most noticeable in the Border region with, under one scenario,  projected births of 123,000 and a population increase of just 18,000, and the West which shows projected births of 97,000 and a population increase of  just 15,000. In fact, under some scenarios the Border, West, Mid-West regions are projected to experience population decline regardless of the internal migration pattern applied.

Overall, the CSO projections paint a familiar picture with Dublin and the Mid-East gaining a higher share of the national population (particularly of younger and more highly educated persons) with everywhere else generally losing share. These demographic trends present a key national and regional development challenge and far-reaching questions for planning practice*. Depopulation and changing population structure implies severe impacts on every domain of urban and regional development, including local authority budgets, infrastructure and amenities, housing market and housing mobility, labour market and employment, residential composition, and social inclusion and cohesion – the entire basis of regional planning policy.

More generally, current and projected population trends highlight the urgent need for a new National Spatial Strategy and to transition beyond the current ‘performance of seriousness’ in relation to balanced regional development.

Gavin Daly

 *See Daly, Gavin and Kitchin, Rob (2013) Shrink smarter? Planning for spatial selectivity in population growth in Ireland. Administration, 60 (3). pp. 159-186. ISSN 0001-8325

The activities of the two main enterprise promotion agencies, IDA Ireland and Enterprise Ireland, play a key role in regional development processes in Ireland. In order to drive regional economic development, the IDA Horizon 2020 strategy aims for 50% of FDI projects between 2010 and 2014 to be located outside of Dublin and Cork.

 The IDA End of the Year Statement 2011 suggests that this target has proven very difficult to achieve. In 2011, 72% of investments occurred in the Greater Dublin Area and Cork alone (up from 63% in 2010). The Forfas Annual Employment Survey reports provide a bit more detail. In 2011 employment in foreign companies in Dublin increased by 4,018. Dublin’s 6.1% growth rate was the second highest after the Midlands region (9%) and substantially higher than the third-placed South West Region (4.7%).

One problem with the Forfas publication is that it only provides the net employment gains/losses. An assessment of regional employment dynamics against the IDA targets requires figures for job creation and job losses. In addition, a dynamic analysis would benefit from a distinction between job creation in existing firm and newly established firms.

One year ago Van Egeraat et al. (2012)* conducted such an analysis as part of their assessment of the performance of the National Spatial Strategy (NSS). Focussing on the position of NSS Gateways, the study identified an increasing level of concentration of foreign firm employment in a select number of Gateways. In the period 2006 to 2011, Cork enjoyed an 8.5% growth in foreign firm employment while employment in foreign firms in Galway was stable (- 0.3%). Dublin, although experiencing a fall in foreign firm employment of 6.2%, was still among the better performing Gateways. As a result, the combined share of national employment in foreign firms attributable to these three Gateways increased from 50.3% in 2006 to 53.2% in 2011. More importantly, in relation to newly established firms, Dublin and Cork together accounted for 69% of all jobs in newly established foreign firms, with the Dublin Gateway alone accounting for 46%.

 As part of a recent study of industrial concentration processes in Ireland we investigated spatial concentration dynamics in 2012. We used the cruder spatial scale of Irish counties. Individual investments can have a strong impact on annual figures, particularly in small counties, but the results for larger counties are robust.  Growth rates of employment in foreign firms in both Dublin (6.1%) and Cork (4.6%) were higher than the national rate (3.9%). Combined, the two counties accounted for 78% of the net gain in employment in foreign firms. In a single year, Dublin’s share of national employment in foreign firms increased by 2.3 percentage points to 40.1%. Cork’s share increased by 0.8 percentage points to 17.3%.

Part of this new employment is created through expansions by existing firms in current operations. These operations are not locationally flexible in their investment decision. Therefore, from a dynamic perspective, focusing on future spatial distributions, the spatial pattern of investment by new operations is of particular significance. Results need to be interpreted cautiously due to the relatively small number of newly established firms in a single year but we identify one clear dynamic: the concentration of foreign firm employment in Dublin. With 24 new foreign operations, creating 1,147 jobs, County Dublin accounted for 71% of all employment in new foreign operations in Ireland in 2012. Financial services and computer consulting services firms show a particular preference for County Dublin.

Dublin's share foreign

We were also in a position to analyse the other side of the story: the spatial pattern of foreign firm employment losses. Foreign firms in Cork accounted for 16% of national employment losses in 2012, roughly proportionate to the county’s share of foreign firm employment in 2011. Foreign firms in Dublin on the other hand accounted for a disproportionately high share of foreign firm employment losses (46% compared to a 38% share in foreign firm employment in 2011). The data paints a picture of a very dynamic Dublin region, characterised by a disproportionately high level of employment loss in the foreign sector but even more disproportionate employment creation in the foreign sector.

Share losses foreign

The distribution of employment created by agency supported indigenous firms is more in proportion to the existing stock of employment. In 2012, Dublin and Cork experienced slight increases in their share of employment in agency-supported indigenous firms (0.5% and 0.3%, respectively). However, both counties accounted for a disproportionately small share of employment created by new agency-supported indigenous firms established in 2012. Dublin accounted for a mere 14% of jobs created by new indigenous firms, compared to a 40% share of indigenous firm employment in 2011. Cork accounted for 10% of indigenous jobs created in 2012, compared to a 12% share of the stock of indigenous jobs in 2011.

Share indigenous

Taken as a whole, the data paints a picture of an increasingly concentrated foreign sector. Foreign companies, notably in internationally-traded services, show a clear, and increasing, preference for the national capital.  The indigenous sector appears to provide hope for job creation outside Dublin. This indigenous sector should receive more attention in our strategies for counteracting un-balanced regional development.

Chris van Egeraat, Dept. of Geography and NIRSA, NUIM Chris.vanegeraat@nuim.ie and Rutger Kroes, Wageningen University, The Netherlands and NIRSA

 *Van Egeraat, C., Breathnach, P. and Curran, D. (2012) Gateways, hubs and regional specialisation in the NSS, Administration, 60(3), 91-115.

After Thursday’s post looking at the house price register to gauge the level of market activity in Dublin, I’ve also now had a look at the mortgage draw down data produced by the Irish Banking Federation and PwC.  Their database runs from Q1 2005 to Q2 2013 and claims to include 95% of the Irish residential mortgage transactions; the data is not geographically disaggregated.

Thursday’s post revealed that the number of sales in Dublin had been steady year-on-year across quarters, with the exception of Q4 2012 when there was a spike in sales due to the ending of mortgage interest relief.  In other words, there has been little noticable difference in the volume of housing sales during 2013 compared with 2010.

The IBF PwC data reveals a similar pattern of purchasing, including the Q4 2012 spike.  If we compare Q2 volumes from 2010-2013, the volumes are Q2 2010 – 7,827; 2011 – 3,551; 2012 – 3,225; 2013 – 3,229.  In other words, there was a large drop from Q2 2010 to Q2 2011, and then the same volumes for the next three years.  For reference, draw downs in Q2 2013 were only 5.9% of those in Q2 2006 (53,499).

mortgage downturn - all

This pattern is consistent when we remove buy to let, re-mortgaging and top-up mortgages (though these were more prevalent in 2010) so that we only examine first-time buyer and purchaser mover figures.

mortgage downturn - ftb mp

As with the house price register data, the mortgage draw down data does not suggest that there is a pick up in the housing market to any great degree.  There was a brief surge in Q4 2012 due to MIR ending, but the market has since reverted to the same state of play as 2011 and 2012.

So that’s two pieces of hard evidence – one generated from Revenue data (inc cash sales) and one by the banking industry – that cast doubt on property sector rhetoric that there has been an upswing in the housing sales.  That’s not to say that there has not been an increase in market activity in terms of viewings and multiple bids on some properties, but that this is restricted to a select group of properties and is not translating into an overall increase in sales.

Rob Kitchin

There’s been an awful lot of rhetoric recently that the housing market is picking up in Dublin and that trading is brisk relative to what it was a couple of years ago.  Most of that rhetoric is coming from the property sector backed up with ancedotal evidence.  The question is whether this is reflected in the hard data of the house price register? Here is a graph of the number of housing unit sales per month since January 2010 for Dublin.

house price sales 2010 2013

What the data shows is that housing unit sales are relatively consistent over the past three and a half years, except for a brief surge at the end of 2012, with December 2012 seeming to be anomaly (probably based around the ending of mortgage interest relief).  The first six months of 2013 are very similar in pattern to 2010.  In fact, in the first six months of 2013 only 328 more units have been sold than the first six months of 2010.  The data does not suggest then that there has been a bounce back in market activity to any significant degree.  What it shows instead is a relatively steady turnover of property.  Market activity in terms of increased viewings on properties, but not in sales, may well reflect a relatively restricted pool of some kinds of properties (family homes; which the property sector is saying is the case).

In general terms, the sales figures reveals that the market is still a very pale shadow of the height of the boom.  The Dublin housing market consists of 527,665 units (in 4 Dublin LAs according to Census 2011).  Normal market turnover would be 5-7% units (higher in a boom), meaning that we could realistically expect in a normally functioning market 2200-3100 sales per month.   So far in 2013 the average monthly sales is 593 (1.3% turnover).

The Dublin market may be stabilising at the bottom of the bust in terms of price falls, but it shows little sign of sales recovery, and it is a long, long way off of being a normal functioning market.

Rob Kitchin

S02642751Paper examining the residential preferences of creative and knowledge workers in Dublin (by Philip Lawton, Enda Murphy and Declan Redmond) published in Cities  (Vol 31, April 2013) available on the UCD Research Repository. Click here for PDF

Abstract. The desire for ‘vibrant’, ‘bohemian’ neighbourhoods forms a focal point of the amenity preferences of Richard Florida’s ‘creative class’ thesis. Here, a vibrant street culture, which includes cafes and restaurants spilling on to the pavement, is implied as being of key importance in the selection of a residential area for creative and knowledge workers. Drawing on quantitative and qualitative data, this paper examines the residential preferences of the ‘creative class’ in Dublin, Ireland. The results illustrate the continued importance of classic factors in residential decision-making, including housing cost, accessibility and travel-time to place of employment. Moreover, the results also illustrate how changes in the life-cycle, including the decision to have a family, have a direct influence on their residential location choice. While there is a tendency for younger workers to select the city centre, older workers predominantly opt to live in suburban areas with good transport connections to the city centre or their place of employment.

The Revenue Commissioners have published a technical paper setting out the method used to calculate the estimated property tax values to guide home owners in the self-evaluation of the tax due on their property.  The model is a hedonic econometric regression model, which is the standard method of estimating and tracking property values.

In many ways, the problem for the Revenue has not been the method to use, but assembling a set of data that can provide robust estimates.  To this end, they have bought together property characteristics from a range of sources:

• Valuation data from the Revenue’s electronic stamp duty system, NAMA, and valuations commissioned by Revenue from professional valuers.

• Geo-Directory (the national address database): a list of all properties in Ireland, their type and location;

• Spatially derived data that indicate relative distances of all residential properties from a series of key amenities and services that add value to property;

• Geographically linked data from sources such as the CSO’s 2011 Census that provide characteristics about areas.

Sources of data used in estimating property tax

Sources of data used in estimating property tax

Having excluded a number of transactional data for various reasons (where the return indicates the transaction is a part of a larger series of transactions; where the return indicates a fractional interest in the property is being transferred; where the return indicates shared ownership; values under €25,000) the result is a dataset of 17,400, 15,000 and 19,200 transactions for 2010, 2011 and 2012 respectively.  This set is relatively small as it based only on transactions since 2010.

34,400 (67 per cent) of these 51,600 properties were successfully matched to a Geo-Directory address point, thus providing property values for units at known locations. These are spread:

• Dublin (Dublin City Council, Dun Laoghaire-Rathdown County Council, Fingal County Council and South Dublin County Council) – 15,693 properties;

• Other cities (Cork Corporation, Limerick Corporation, Galway City Council and Waterford Corporation) – 3,039 properties;

• Rest of the country (all remaining county councils) – 18,014 properties.

These properties with known values provided a basis on which to estimate the value of near-by property with similar characteristics in each Electoral District in the country. Ideally, it would have been preferable to provide estimates for Small Areas given the variation in stock in an ED, but the relatively small data set precludes doing this robustly and EDs are the best that can presently be achieved.

Given that the value of property varies geographically, rates differ across the country, with the highest mean values in Dublin and the Leinster region.

Average values per location

The vast majority of properties are valued in the lower bands, reflecting the 50% fall in residential prices since 2008.  Indeed, 91.3% of residential units are estimated to be worth less than 300K, with 60.6% less than 150K.  I can imagine that the low estimated value of many properties might come as a shock to many homeowners and reveal the extent to which they might be in negative equity.

number of properties per band

What this means is that the property tax value for 60.6% of residential property owners is estimated to be €225 or less per annum.  For another 22.7% it will be €315, 8% it will be €405, and 3.1% it will be €495.  Only 8.3% of residential property owners will pay €585 or more.

property tax rates Ireland

As with any model, the one developed by Revenue is not going to be 100 percent accurate and they provide some estimate as to the probability that the valuation is in the correct band.  91% are either in the right band, or one band above or below.

correct band

This suggests that there might be some horse-trading between property owners and Revenue as to whether they are in the right band or one very close to it, but in the main their estimates will be quite near to the actual value and the haggling will be over c.80-90 euro difference in cost between adjacent bands (with I suspect all challengers looking to move downwards).

To be fair to the Revenue Commissioners the approach they have taken is the industry standard and they have used all the possible data at their disposal. Their problem has been the small number of known valuations to work from and a lack of information about every property (type, number of rooms, etc).  As such, the model seems to be as robust as it can be given the data constraints, though it is not without its issues such as having to provide estimates for EDs rather than Small Areas.

Rob Kitchin

Prompted by a colleague, I’ve been browsing the CSO Census report, The Roof over our Heads.  It is full of information from the Census 2011 on households and housing in Ireland.  I’ll probably blog about some of the other material at some point, but I thought it might be useful to point to some of their data on housing vacancy, a familiar topic on this blog.

In the report, the CSO produce an interesting map of all vacant residential address points in the country classified as vacant houses, vacant apartments and holiday homes.  There is little chance of identifying individual properties from this map as it is a scale of 1: 1 million, but by plotting the individual units as opposed to shading in areas we can get a sense of the scale of the issue (which in numeric terms is: 168,427 vacant houses; 61,629 vacant apartments; 59,395 holiday homes; out of total stock of 1,994,845 residential units).

Map of vacant properties in Ireland

Map of vacant properties in Ireland

There is clearly a patterns to holiday homes, concentrating on the coast, as well as the upper and lower Shannon.  Vacant apartments are mainly confined to large urban areas.  And whilst, there is much media talk at present concerning a shortage of family homes in Dublin, the data reveal there is no shortage of apartments.  In fact, there are 16,321 empty apartments in Dublin City, let alone the other Dublin local authorities.  As for vacant houses, they are everywhere.  The few blank spots are mountains or remote areas.

The CSO report also provide some data on towns with the highest levels of vacancy, both including and excluding holiday homes.  The table below lists the seven towns with the highest levels of vacancy excluding holiday homes.  In the case of Tulsk and Ballaghaderreen, two places I have some familiarity with, there is a strong correlation with the presence of unfinished estates.  However, as we have discussed elsewhere, unfinished estates are just one element of vacancy given that there are only 16,881 vacant properties on such estates, meaning there is a high degree of background vacancy in many locations beyond unfinished estates (see our AIRO VacantIreland interactive mapping tool that let’s you examine vacancy at Small Area level and individual unfinished estates).

most vacant towns

Rob Kitchin

Eurostat, the European statistics agency, recently released the Q3 2012 results for its pan-European house price index (HPI).  The data charts house prices on a standardized basis for 2007-2012, baselined against Q2 2010 (=100).  The index tracks price changes of residential properties purchased by households (flats, detached houses, terraced houses, etc.), both newly-built and existing stock. The Member States’ HPIs are compiled by the national statistical institutes, while Eurostat calculates the euro area and EU HPIs.

The AIRO team have compiled these data into an interactive data visualization accessible on the AIRO website.

What the data allow is a comparison of whether house prices have gone up or down over time with respect to the baseline.  For example, if we consider Ireland against a baseline of 100 in Q2 2010, in Q3 2007 house prices were indexed at 151.7 but had fallen to 75.3 by Q2 2012.  In other words, house prices had halved in valued over that period.

What the data reveal is that during this period of European financial crisis property markets behaved in four different ways across Europe.

1. Prices have declined continuously, either steeply in the case of Ireland, Spain, Romania and Bulgaria or more modestly such as the Netherlands and Cyprus.

2. Prices declined and then have either levelled off (e.g. Denmark, Slovenia) or have bounced back modestly (Estonia, Latvia, Lithuania, which all experienced very dramatic and rapid declines).

3. Prices have bounced along within a few percentage points of the baseline (e.g., Austria, Czech Republic, France, Greece, Hungary, Italy, Malta, Slovenia, UK) and effectively have flatlined.

4. Prices have increased modestly but steadily (e.g., Belgium, Finland, Germany, Luxembourg, Sweden).

These differences arise due to issues such as the nature of the national housing markets (e.g. proportion of renters/owner-occupiers), the robustness of the wider economy during the crisis, and wider property market issues such as levels of oversupply where excess supply, coupled with a financial crisis linked to property, work to depress prices in the absence of sufficient demand that would halt decline.

There is tentative evidence that the Irish decline might be starting to level off, but we need a few more quarters of data to reveal whether this is a sustained trend.  The decline, however, has been the worst in Europe in terms of sustained, rapid decline with no levelling off or bounce back.

EU house price index

Justin Gleeson, Eoghan McCarthy, Rob Kitchin

The latest tranche of Census 2011 results for Northern Ireland were released yesterday. They provide information of demography, identity, health, housing, education, labour markets, and travel and migration at a variety of geographic scales: 18 Assembly Areas, 26 Local Government Areas, 582 electoral wards, 890 Super Output Areas, and 4,537 Small Areas. Data is available for download here and accompanying mapping boundaries here (Great work by NISRA and a good example of open data)

The rich diversity of data released, and its detailed geographic resolution, enables the general public, policy makers, government and business to better understand the people and places of Northern Ireland in 2011, and the trajectories of change over time, and provides a fresh evidence base for formulating new policy and business plans. Indeed, fresh evidence was needed as Census 2001 has been used as a core base for policy formulation right up to this new release, despite it being over a decade old. What the data makes clear is that whilst there is some continuity, there has also been much change with respect to Northern Irish society and economy over the past decade. By mapping the data and undertaking time-series analysis it will be possible to understand the processes shaping different facets of everyday life and to model future scenarios for planning purposes.

To get started on all of this we have developed an interactive mapping tool for the Northern Ireland Output Areas (OA) and selected some interesting variables for Day 1: Population, National Identity, Religion, Qualifications and Unemployment. Have a look at the new mapping tool here

NIMapper

Over the coming weeks we’ll add to this tool and will also start on our new INTERREG funded project (with colleagues at ICLRD) that will allow us to develop a very comprehensive All-Island Census Mapping Atlas that will look at change on the island from 2001 to 2011.

Justin Gleeson

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