Ireland’s house prices in comparison to EU27, 2007-2012

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.

Justin Gleeson, Eoghan McCarthy, Rob Kitchin

 

The Geography of Actual Sales Prices

The recently releaseed Residential Property Price Register provides actual sales prices of houses and apartments in Ireland since January 2010.  Yesterday we put up a set of interactive graphs of the data along with some commentary concerning its scope and quality.  Today is the turn of some maps and a look at the geography of the actual sales prices.  Below are five maps – the median price of property in each local authority for 2010, 2011 and 2012, actual change in price and percentage change in price 2010-2012.  We’ve used median rather than the mean to try and control for the skewing effects of outliers and errors in the data (as detailed in our post yesterday).

What the maps show is a clear drop in prices across the country (click on the maps for higher-res versions).  In 2010 no local authority had a median below €127,000.  By 2012, nine local authorities have median prices below €100,000 and a further nine below €127,000.  All of these local authorities are predominately rural in character with a clear divide evident between the principal cities and their commuting hinterlands and everywhere else.  In absolute terms, the biggest drop in median prices between 2010-2012 were in Wicklow, Laois and Waterford, all with inexcess of €67,000 drops in median prices. In percentage terms, Laois and Waterford both sustained large drops in median prices, in excess of -40%, and are joined by similar drops in Longford and Roscommon, with Monaghan not far behind (-39.8%).  In contrast, median prices in Dublin, Kildare and Limerick only dropped by between -20-25%.  Perhaps somewhat surprisingly, the percentage median change for Leitrim is only -23.5%, though this is partly reflective of its overall, relatively low prices.  Also see the interactive graphs.

What the maps reveal, in contrast to CSO price index which only provides an overview of residential property prices for Dublin and elsewhere, is that there is a geography to actual sales prices, with prices falling more in some parts of the country than others, affected by local conditions and markets.  There will also be a geography to the market bottoming out and to market recovery.  Whilst the Central Bank report that the market may take up to 18 years to recover, where and when will vary spatially, and we’ll now be able to track such patterns using the PSRA data.

Median residential property price, 2010 (PRSA data)

Median residential property price, 2011 (PRSA data)

 

Median residential property price, 2012 (PRSA data)

Absolute change in median prices 2010-2012 (PSRA data)

% change median prices 2010-2012 (PSRA data)

 

Eoghan McCarthy and Rob Kitchin

 

Data visualizations of Residential Property Price Register

As noted in Monday’s post, the Property Services Regulatory Authority (PSRA) has launched the Residential Property Price Register (RPPR).  It provides sale price for individual properties for all residential sales, including cash sales.  The data includes the address of each property sold, the date of sale, and the price.  AIRO has been examining the data and has produced a set of interactive data visualizations that summarize the entire dataset by local authority and individual property.  These provide average sales price per local authority and also the median sales price to reveal/compensate for the skewing effect of a small number of very expensive properties, prices of individual properties, box plots of sales per local authority, number of new/secondhand properties.

The data visualisations use the full dataset as published.  Whilst we are confident that the vast majority of the data are robust, it is also clear that there are a small number of errors/issues in the dataset that are having a skewing effect.  These are of two types.  First, some properties have the wrong sale prices attached to them (some checking online reveals that the asking price was radically less than the recorded sales price).  We think that a number of them are probably decimal point errors (e.g. the sale price should be recorded €241k not €24.1m).  Second, several properties have been clumped together and not disaggregated (e.g. an entry of 30 apts for €4.5m, rather than 30 entries for €150K each).  We have not cleaned these errors/issues as we do not know what the correct values should be (the use of the median prices compensates for their skewing effect). We did also try and map all of the properties.   This has proved difficult because the PSRA have not used Geodirectory to clean, standardise and geocode their address format, with a variety of formatting used and many spelling mistakes that make matching to Geodirectory not straightforward.  Even for Dublin we only got a 60% address match on a first pass run, meaning the other 40% would require additional work to match.  Despite these issues, the data does give us a good picture of number of sales and sales prices post January 2011 in different parts of the country.

Eoghan McCarthy and Rob Kitchin

 

Residential Property Price Register launched

It’s probably no coincidence that the Residential Property Price Register (RPPR) was finally launched yesterday by the Property Services Regulatory Authority (PSRA) just ahead of the latest quarterly reports by Daft.ie and Myhome.ie.  The latter two have been key sources of information about house prices over the past few years, providing asking price information at local authority level, along with the CSO’s Residential Property Price Index that provides average selling price but aggregated to two zones, Dublin and everywhere else.  All three existing sources of property price data have problems, either providing asking rather than selling price, and/or having very weak spatial resolution that enables an analysis at a local level, or in the case of the CSO not including cash sales.

The RPPR addresses these issues in that it provides sale price for individual properties for all residential sales, including cash sales.  The data includes the address of each property sold, the date of sale, and the price.  It is not without its shortcomings, however. Details about the property sold are limited, with no infromation about the size of the property (e.g. number of bedrooms) or site size or if the property is a house or apartment (although it does report if it is new or secondhand).  It only includes property sold since January 2010 meaning that whilst it gives an indication of current values it provides no long-term detail on the drop in value since the start of the crash.  In addition the PRSA notes that ‘In a small number of transactions the price reported does not represent the full market price of the property concerned for a variety of reasons. For example, the price declared may reflect the retention of an interest in the property by the previous owner, or the fact that a part or fraction only of the property is being purchased; alternatively, the property may have been purchased at a reduced price under the Affordable Homes Scheme.’

That said, the RPPR marks a significant step forward in filling a large data gap with respect to residential property in Ireland.  It means that for the first time buyers and sellers will be able to see how the market has been performing locally, rather than having to rely on estate agents guidance.  It also provides property analysts with a much better picture of the state of the housing market.  It therefore is to be very much welcomed.

Rob Kitchin

 

Data visualisation of CSO’s Residential Property Price Index

The AIRO team have taken the data from the CSO’s Residential Property Price Index report and compiled it into an interactive data visualisation.  It provides details on overall price drop, year-on-year drop, and RPP index score for all properties, houses and apartments nationally, Dublin only, and nationally minus Dublin.  Click on the image below to connect to the data visualisation, then just click on the check boxes/drop down menus to change the data, and click on the graph itself to get specific information.

 

Eoghan McCarthy and Rob Kitchin

 

House prices stabilising?

The latest CSO house price report has been released by the CSO.  What the data show is that “Residential property prices grew [nationally] by 0.2% in the month of May. In Dublin residential property prices rose by 0.2% in May but were 17.5% lower than a year ago. Dublin house prices increased by 0.5% in the month but were 17.7% lower compared to a year earlier. Dublin apartment prices were 16.3% lower when compared with the same month of 2011.  The price of residential properties in the Rest of Ireland (i.e. excluding Dublin) rose by 0.1% in May … Prices were 14.2% lower than in May 2011.“

The piece of data that the media are likely to focus on is that Dublin houses have now not fallen for three months in a row, growing very marginally each month.  In other words, prices for Dublin houses seem to be potentially stablising.  Before we get ahead of ourselves my view would be that prices have to stabilise for at least 6-9 months before we can start to call the bottom as the market is still fragile and there have been other periods on the way down where it appeared to level off before then falling again.  Moreover, the year-on-year reduction is still large.  Dublin apartments still seem fragile – they have fallen the most from peak (61%), fell again last month after two months of not falling further.  Nationally, excluding Dublin, seems fragile still and one would expect prices to fall as much as Dublin prices in the long term given levels of oversupply outside the principal cities.  Dublin does have relatively normal levels of housing vacancy (4.9% according to Census 2011) but not apartments (18.6%), so it does seem supply/demand might be coming into line for houses (particularly in South Dublin where vacancy is 3.4%) but certainly not apartments.  There is oversupply of houses and apartments everywhere else, including the other cities.  It should also be noted that the CSO index does not including cash sales and is based on a relatively small number of transactions.

Basically what this means, is whilst the indications are positive for Dublin houses, we should be careful not to read too much into the data until we have a time-series of stabilisation, and the property market remains very fragile.

Rob Kitchin

 

CSO Residential Property Price changes 2005-2011

The release of Residential Property Index figures for the month of December 2011 by the CSO allows the comparison of how house prices have performed between January 2005 and December 2011.  Such a comparison provides an overview of when and how the market has changed and what sectors have been affected the most by the downturn in property prices.  Rather than having to wade through 20 pages of tables, we have converted the data into a set of interactive graphs that detail overall change, annualised change and RPP index score (baseline 2005).  A brief analysis of figures reveals that overall house prices nationally are down 47.1%. Apartments in Dublin have declined more than any other market sector with a fall of 57.7%. Overall house prices in Dublin have fared worse than outside Dublin with a fall of 53.7% in comparison to 42.4% outside Dublin.  The period of greatest annual decline was recorded in August 2009 when prices were 20.8% lower than 12 months previously. The decline between Dec 2011 and 2010 was 16.7%.  To access the interactive graphs on AIRO click on the image.  Full CSO report is available here.

Eoghan McCarthy and Rob Kitchin

 

Property register, house price and rental yield mapping

Yesterday the Irish Times reported that the Property Services Regulatory Authority (PRSA) hope to have a property register live by June 2012 that will give information on house price sales and commercial leases for 2010 and 2011.  The register will give a valuable insight into the housing and commercial market going forward and is to be welcomed.  What it won’t do is give us a detailed retrospective view of the property market at the tail of the boom and through the crash given the 2010 base date.

In collaboration with Ronan Lyons, Oxford University and economist at daft.ie, NIRSA through its AIRO project has been working on producing a set of maps charting various aspects of the housing market including asking price and rental yield using Daft.ie‘s database.  This database includes over 980,000 rental observations and over 600,000 sales observations from 2006 through to the present day.  Importantly, the maps are at sub-county scale, plotted into over 1,000 geographical units made of aggregates of EDs and EAs.  We hope to launch the interactive mapping tool in the coming weeks, but thought we’d give a brief taster on IAN of some of the preliminary output.  The maps below are examples of our initial work and look at 3 bed semi (or equivalent) deciles of asking price , rental asking price, and rental yield. The new mapping tool will contain sales and rental prices for 2-bed, 3-bed, 4-bed and a weighted average for all 1-5 beds. Prices wil be avilable for the peak (2007 q3), current prices (2011 q3) and % fall in the average price.

Once the interactive mapping tool is launched we’ll provide some more maps and analysis of the material.

Justin Gleeson and Rob Kitchin

 

Six reasons why the property market is going to be very slow to recover

The general consensus amongst economists and property specialists is that the housing market is yet to reach its price floor.  Prices have fallen by 40-50% across the country and are expected to fall by c.60% by the time they are fully unwound.  There has been some speculation that the market might recover quite quickly, especially in the cities, with population growth cited as the prime factor to drive such a turnaround.  The hope is that Ireland might mirror the reasonably rapid recovery of the mid-1990s Finnish property crash, rather than the stagnation of the Japanese crash from the late 1980s wherein present property prices are still below those twenty years ago.  My own view is that the Irish crash will be nearer to Japan’s experience than Finland, with property prices unlikely to rise to peak 2007 prices for at least another ten to fifteen years, and longer for some parts of the country.  There are six reasons why.

1.  Still unwinding

As noted, Ireland is experiencing a steady but relatively slow unwinding of the property market, with property prices still falling.  They seem set to keep falling for at least another 12-24 months and possibly longer.  Until the market has fully unwound there will be no correction or growth.  And once it’s unwound there are a number of factors, set out below, that are likely to see the market flatline or only grow marginally for a number of years to come.

2. Oversupply

The property sector have tried to spin the data around oversupply every which way they can to make the issue appear better than it is.  Principally they’ve tried to focus on unfinished estates, arguing that oversupply is brand new, complete but vacant property.  They ignore the stock still being built on these estates and the vacant, brand new and under-construction one-off properties around the country.  They also largely ignore the vacant stock in the rest of the housing stock, principally on the argument that any property that is owned does not represent a problem, despite the fact that it can still be a part of the housing market and affect that market.  The Census 2011 preliminary results reported that there are 294,202 properties around the country that are vacant and habitable (14.7%).  Some of these properties, c.80-100,000 are holiday/second homes.  In any housing market one would expect some vacant stock, usually 3-4% (the Irish government uses a base vacancy rate of 6%).  Even in Dublin, vacancy is running at 7.8%, with a large oversupply of apartments in particular.  What that means is that there are c.200,000 vacant properties in the country excluding holiday/second homes, c.100,000 of which are in excess of expected base vacancy.  That is a substantial oversupply.  When supply exceeds demand prices fall or remain weak.  Until supply and demand are aligned, it is unlikely that prices will rise to any great degree.  For the last two years the property sector has told us that supply is running out in some areas and we need to start building again.  The data – either in terms of oversupply or units available to the market – does not yet support this assertion.  The property sector can try and spin oversupply estimates however they want but the evidence of vacant oversupply all round the country is plainly evident to purchasers.

3.  Weak demand

Demand for housing in Ireland over the past twenty years has been driven by two principle factors – population growth (net natural increase, net migration increase) and household fragmentation.  Basically, population grew rapidly (by a million people between 1991-2011) and the average household size fell.  The effect of the latter process can be quite profound, for example if the population remained the same size but the average household size fell then the population would need to occupy much more stock.  Whilst we do expect the population to grow over the next twenty years, it is tempered by two factors – emigration (there is presently net migration of -34,000 per annum) and age profile (the bulk of natural increase is accounted for by children under the age of five).  Emigration is primarily being undertaken by young adults (aged 20-40) who are at household formation stage; children under the age of five will not be at household formation stage for another twenty years.  Household fragmentation is affected by economic circumstance with children more likely to stay at home, parents less likely to separate, and young adults to share property to keep down costs.  These are often choices, not a compulsion, and until the wider economy recovers household fragmentation is likely to weaken.  One factor used to try and off-set these arguments is to focus on the social housing waiting list as evidence of pent-up demand.  In March 2011 the DECLG revealed that there were 98,318 households on the social housing waiting list.  However, 65,643 of these were in suitable housing, but they could not afford the rent and were receiving rent supplement.    The need for additional social housing stock then is c. 33,000 (still a relatively substantial need), though it’s fair to say that that much social housing stock is in need of replacement, though the State cannot afford such programmes at the moment.

4. Negative equity and mortgage arrears

Properly functioning housing markets require a mobile population.  It is estimated that at least one in three household mortgages in the state are in negative equity.  Regardless of whether they want to trade-up or down, or to move to another part of the country they are locked into their present property unless they are prepared to realise a loss.  The Central Bank estimate that over 50% of investor, buy-to-let properties are in negative equity.  When prices do start to rise at least one in three housing units with mortgages are largely precluded from moving until prices rise sufficiently that they can trade.  Moreover, 62,970 households (8.1% of mortgages) are more than 90 days in arrears on their mortgage payments and a further 36,376 have restructured their mortgages (and so far are not in arrears).  This is a substantial growth on the 26,271 households in arrears in Q3 2009 and looks set to keep rising as households struggle to meet debt commitments, and might well be joined by many investors on interest only mortgages if they are asked to start paying down the capital.  Further, 25% of properties have more than one loan secured against it.  What this all means is that a sizable chunk of potential movers/sellers are impaired and will be absent from the market for some time.

5.  Downward spiral of the economy and accessing credit

The Irish economy has been severely weakened over the past four years and household income and access to credit is much reduced.  Austerity measures are biting through various tax increases and deductions.  Many are living with a radical change in financial circumstance through unemployment (14.4%) or underemployment.  An unstable Europe and general weak global economy is having a deadening effect.  The banks are reluctant to lend for mortgage credit.  What this all means is that even if a household wanted to purchase a property, their own reserves are depleted and their access to credit restricted.  This is unlikely to change until the wider economy recovers and the banks have worked through their corrections.  This is going to take a number of years, probably the best part of a decade or more.

6.  Confidence and caution

Confidence in the property market and the property sector in general is at an all time low.  Few at this stage believe what property professionals have to say regarding the property crash, housing need and construction.  They are seen as self-interested groups who are more concerned in their own bottom-line than the state of the nation.  People view the work of NAMA with deep scepticism and lack trust in the government and local authorities to address issues such as unfinished estates and taking in charge.  Issues around poor construction typified by Priory Hall and disputes concerning pyrite in concrete have weakened confidence further.   Investment purchases by individual households, a key feature of the boom (27% of mortgages in 2007), is likely to be much less prominent giving how badly burnt many investors have been by the crash. Combined with the issues above, it seems likely that confidence will remain weak and that buyers in future will proceed with caution.  Growth when it does occur then will be marginal and hesitant, perhaps after a short dead cat bounce.   Assuming the market falls 60%, at growth rates of 5% a year, which would be a good target to aim for, it will take 19 years to reach 2007 prices.  Even in the cities, where growth is likely to be the strongest, it’s going to take some time for confidence to return.

I would like to provide a more upbeat, positive assessment, but the evidence just doesn’t support that sentiment at this time.  Ireland’s property crash, aligned with the weak domestic and international economy, is severe.  For the reasons above, it’s my view that the market is going to be very slow to recover.  It will though recover as supply and demand align and the economy stabilises and starts to grow again.

Rob Kitchin

 

Where are we at with house and land prices?

There have been a couple of reports this week on house and land prices for 2010.

MyHome.ie – Quarterly property barometer

Daft.ie – Quarterly report

Sherry Fitzgerald – house price index

Indo Farming Supplement

If there is good news from these reports it’s that house and land prices did not fall as much in 2010 as they did in 2009.  That said, they did decline quite substantially.

With respect to house prices nationally, Daft, MyHome and Sherry Fitz all calculate Q4 declines:

Daft = -4.8%; MyHome = -3.2%, SF Q4 = -4.2%

Similarly, all three report 2010 declines in prices nationally of:

Daft = -14%; MyHome = – 13.1%, SF Q4 = -12.0%

Declines since the peak are estimated nationally as:

Daft = -40%; MyHome = – 34.6%,

with Dublin falls being substantially more:

Daft = -40.4% to -49.6%; MyHome = -36% to -48.9% depending on area in the city.

In general, there seems to be quite good alignment between the reports, although when compared at a county level there are some quite sizable differences between counties.  Leitrim is the one that stands out.  Daft report that house prices in the county declined by -13.4% in 2010, MyHome report that prices didn’t decline at all (0%) over the year, even rising in the final quarter.  Given the levels of oversupply and weak market in Leitrim it’s difficult to believe that house prices are stable in the county when they are falling everywhere else.

Sherry Fitz reported that 49.7% of all purchases were by first time buyers, and 27% of vendors were selling investment property.

Farm land prices nationally averaged €8,420 per acre, down €8,800 (-4.3%), slowing significantly from declines in 2008 and 2009.

As for what 2011 brings.  All predictions are for a further slippage in prices given the state of the economy overall and the surplus of overall stock (both new and secondhand).   The falls might though slow a little as stamp duty changes encourage people to re-enter the market to move up or down.  As Ronan Lyons notes in his analysis for Daft there are, however, significant regional variations now in housing market dynamics, with Dublin in particular operating in a different way to the rest of the country, and it may well be the case that house price falls will vary quite considerably across the state in 2011, especially if the sticky decline in rural areas speeds up.  MyHome‘s hope that there is an overhang of pent-up buyers waiting in the wings to come into the market once the house price trough is reached seems a little fanciful – this is the generation who are emigrating in droves, with substantial numbers on the Live Register, the need to build a large deposit, and difficulties in accessing mortgage credit.  I would think demand is pretty soft all round, and even if people moved out of rental accommodation into their own homes this creates an addition problem of further oversupply in the rental/investment sector and the potential to push that property onto the market.  The effects of the future property tax may also slow sales as people wait to find out what their commitment might be.  Overall, 2011 seems set to be another year of decline, but perhaps not as drastic as 2010 and certainly not as bad as 2009.

Rob Kitchin