November 25, 2011
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
November 21, 2011
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.
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.
November 18, 2011
Policy formulation and decision making that is undertaken largely in secret, that affects large swathes of the population, is rarely a success. Two striking examples from the previous government is the bank guarantee and decentralisation. Both policy decisions were made with no consultation, even within the cabinet or political parties let alone opposition parties or the public. Both have proven to be controversial and disastorous. Interestingly, it is the legacy of the bank guarantee and austerity that has finally killed off decentralisation.
As announced yesterday, a total of 40 decentralisation projects are to be scrapped; a further 32 projects (mainly in locations where permanent accommodation has been secured) will be left in place; decisions regarding an additional 22 projects are pending. Decentralisation was announced by Charlie McCreevy in 2003 to the surprise of just about everyone except himself. As an idea, decentralisation has some merits, but not in the cack-handed way that McCreevy envisaged it. Rather than tying decentralisation to the aims and ambitions of the National Spatial Strategy announced in 2002, with departments and agencies clustered into gateway cities and hub towns, they were scattered across the nation into just about the most inefficient arrangement as possible, almost exclusively ignoring the growth centres identified in the NSS. As a measure designed to improve governance and local/regional development it was as bad as it got, ignoring best practice around agglomeration effects. As Proinnsias Breathnach on this blog has argued, decentralisation did not “merely completely ignore the NSS but actually served to undermine it. This, despite the explicit commitment in the original NSS document that ‘The Government will take full account of the NSS in moving forward the progressive decentralisation of Government offices and agencies’ (p. 120). Quite rightly then that Taoiseach Enda Kenny described it yesterday as one of the most “ill-judged, badly planned ideas” of the previous government.
The bottom line is that tactics without (democratically debated and agreed) strategy is a recipe for disaster. It is somewhat of a shame then that the reform of the public sector announced yesterday follows the same pattern. The plan is simply to cut numbers – numbers of agencies, numbers of staff. There is no evidence as to a strategic vision as to why organisations are being cut or merged, or which workers need to be trimmed from the public service, or how the public sector will look in five years time other than thinner. The tactic for reducing staff is early retirement and to let contracts lapse. There is no targetting of particular types of job; no re-envisioning of an organisation and its work and work practices; no plan as to how reshape. The strategy seems largely to pray that the right kinds of staff are left once the labour force has been reduced.
The NSS and NDP were strategies about envisaging the future of Ireland and how we were going to achieve that future. We need a new NSS and NDP fit for purpose, with budgetary decisions tied to them. A tactic composed simply of cuts, with no grand plan other than to reduce spend does not form a strategy. And tactics without strategy is no way to try and get a country out of recession – it relies on serendipity and luck and is as likely to fail as succeed.
November 4, 2011
Posted by irelandafternama under Uncategorized
Legislation providing for the inspection and registration of septic tanks has just been published according to page two of today’s Irish Times. The legislation is coming under fire from Opposition who suggest that it is full of hidden charges for home owners with septic tanks. It seems that a first inspection is free with any additional inspections coming in at €200 a go, this may also be on top of a €50 registration fee and the cost of any necessary upgrade works. Original costs proposed by the department were €50 per inspection and would be required to take place every five years. The legislation also suggests that inspections will be concentrated on areas with higher risk to the environment.
We thought it would be interesting to have a look at the location of these ‘high risk’ areas. However, to develop an accurate picture of this a lot of data would be required – geographic location and age of septic tanks, water features, soil types etc. For the moment we are therefore just going to concentrate on the location of septic tanks across the country.
By using 2006 Census data (http://www.cso.ie/census/Census2006_Volume6.htm) we can get a reasonably accurate picture of the number and distribution of septic tanks across the country. It must be noted that this is based on what was recorded on the census forms, enumerators didn’t go digging around in back gardens to verify. So, according to the census in 2006 there were a total of 1,462,296 total private dwellings in permanent housing units in Ireland, of these 418,033 had individual septic tanks, this equates to 28.6% of housing units. The vast majority of housing units are connected to public schemes (956,239 or 65.4%), almost 37,000 (2.5%) housing units have other types of individual sewerage systems that are not septic tanks and a total of 4,179 housing units have no sewerage facilities at all. Another 47,181 or 3.23% were recorded as ‘Not Stated’.
If we look at the spatial distribution of the estimated 418,033 septic tanks throughout the country there is a clear spatial pattern. It’s generally low in urban areas as housing units are all, or should be, linked to public schemes. As expected, the highest concentrations of septic tanks are within areas outside the main cities and towns. Map 1 below details this distribution and highlights particularly high concentrations in areas of east Meath, and the city environs of Cork, Limerick and Galway. On a county by county basis the highest numbers of septic tanks are in Cork County, Galway County, Donegal, Kerry and Mayo. The lowest numbers are within the main cities – Limerick, Cork, Waterford, Galway and the Dublin Local Authorities
If we standardise the results by total number of households we start to get a different picture with the highest proportions within more rural areas. Map 2 details this distribution and shows very high proportions within County Galway (67.94%), Roscommon (61.48%), Donegal (56.38%), Leitrim (55.92%) and Mayo (54.88%). Again, the proportions within the city areas are extremely low with all below 4%.
November 1, 2011
Posted by irelandafternama under Uncategorized
Settlement charts the fallout from the collapse of Ireland’s ‘property bubble’, a result of the overheated Celtic Tiger economy. For this exhibition Anthony Haughey has created an installation in Fire’s new Copper House Gallery, which reflects the financial, ecological and domestic impact of Ireland’s economic collapse. His installation will incorporate a collaboration with some of Irelands architects – in collaboration with DIT Department of Architecture and Urban Design, NAMAlab, UCD School of Architecture and Mahoney Architects – who have proposed visionary plans for abandoned and half-finished buildings currently littering the landscape. These architectural proposals will form part of the installation in the gallery and will also be viewable in their site- specific context by using a freely available smartphone app (QR reader) to scan a QR code fixed to the hoardings of various NAMA building sites around Dublin city.
The photographs in Settlement are produced in the half-light between sunset and sunrise. The combination of darkness, artificial light and long exposures draws attention to the destruction of the natural environment as a result of over development. In this ongoing series, these ghost estates are recast as eerie ‘monuments’ – testament to the end of Ireland’s gold rush and the resulting cost of unregulated growth and institutionalised speculation.
More recently, Pyrite was discovered as a component of hardcore under the foundations of more than 20,000 new homes in North Dublin and Co. Meath, resulting in serious structural damage. Pyrite also known as ‘fools gold’ is a tragic but fitting metaphor for this exhibition and the demise of Ireland’s speculators.
Public Discussion: 6 – 8pm, Tuesday 1 November 2011 at the Copper House Gallery.
How can we move away from the current political stasis and re-imagine a future for ghost estates, commercial developments and public spaces?
An invited panel will meet to discuss this question with the artist.
Paschal Mahoney, Architect, visit Trees on the Quays
Frank McDonald, Irish Times Environment Editor
Dr Cian O’Callaghan, Cultural Geographer, NUI Maynooth
Val Connor, Independent Curator & writer will chair the discussion
All are welcome to participate in this free event. To ensure a place, please call 01 4784088