House prices in Dublin might be rising, but we’re a long, long way from a normal market

Perhaps not unsurprisingly the start of 2014 has been greeted with a number of commentaries in the media concerning the Irish housing market, specifically about the upturn in the Dublin house prices and the possibilities of the start of a new price bubble, and the development of a two-speed housing market between Dublin and the rest of the country.  Part of the impression being given is things might return to ‘normal’ in the capital if issues of undersupply of family homes can be resolved, though the situation elsewhere is less certain given oversupply, demographics and labour market conditions. 

The reality is that housing in general is far from normal across every indicator there is both in and outside Dublin and a rise in house prices in the capital, whilst welcome for those in negative equity, is a symptom of these problems and a lack of a housing strategy to deal with them.   Prices will almost certainly continue to rise in the capital during the year, but it is only when all the other indicators – such as mortgage arrears, housing waiting lists, etc – start to be righted that the market will start to resemble a normal one.  That is likely to take a number of years given the depth of problems at hand.

Here’s the present state of play:

House prices (CSO): Nationally: increased by 5.6% Nov 2012 to Nov 2013 – 46.5% lower than its highest level in 2007; Dublin: increased by 13.1% Nov 2012 to Nov 2013 – 49.2% lower than February 2007; Rest of country: decreased by 0.6% Nov 2012 to Nov 2013 – 46.9% lower than February 2007

New mortgage draw-downs Q1-Q3 (Irish Banking Federation).  2006 (83,860); 2010 (14,289); 2011 (7,907), 2012 (8,582); 2013 (8,711)

Cash sales (industry anecdote): c.50% in 2013

Mortgage arrears for principal residences up to Q3 2013 (Central Bank): 141,520 (18.4%); of those 99,189 (12.9%) are over 90 days in arrears.

Mortgage arrears for buy-to-let (BTL) up to Q3 2013 (Central Bank):  40,426 (27.4%); of those 31,227 (21.2%) are over 90 days in arrears.

Negative equity (Davy Stockbrokers): c.50% in 2012

House building (Dept Environment): 2006 (93,419), 2010 (14,602), 2011 (10,480), 2012 (8,488), 2013 to Nov (7,425).  Of houses built in 2013 (to Nov); 4,274 are one-offs, 2,383 scheme houses, 768 apartments

On social housing waiting list (Dept Environment): 2008 (56,249), 2011 (98,318)

Housing Supply (CSO, Census): Oversupply of property outside of Dublin, with high levels of vacancy (10%+) in all but five local authorities; undersupply of family homes in some parts of Dublin.

Planning permissions (CSO): 2013 up to Q3 – Dublin: 3,116 (houses), 807 (apartments) [3,923] – Rest of country: 6100 (houses), 1035 (apartments) [7,135]; 2006 first three quarters – Dublin 6,482 (houses), 7,153 (apartments) [13,365] – rest of country 87,426 (houses), 8,397 (apartments) [95,823]

Land supply 2013 (Dept Environment): Dublin 2,575 hectares for 132,166 units; Rest of country 11,132 hectares for 262,191 units

Unfinished estates (Dept Environment): 1,258

Pyrite-infected homes (Dept Environment): 74 estates, consisting of 12,250 units.

As I’ve argued previously, we need of a coordinated strategy to deal with all the issues affecting housing in Ireland, including long-term plan of future need, and this needs to be part of a wider National Development Plan/National Spatial Strategy aimed at cross-sectoral recovery.  At present, we just seem to be hoping that the various problems will somehow be corrected through the market or piecemeal, ad hoc or limited schemes, rather than taking a more proactive, coordinated approach.

Rob Kitchin

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Why we need a housing strategy ASAP

The newspapers at present are full of talk of the resurrection of the housing market and the growth of house prices in Dublin.  It seems that housing market is finally stabilising and that the long waited for market correction is starting to take place.  Moreover, it is being suggested that we need to start building residential units again and to zone more land in Dublin (this is despite the fact that 2,575 hectares (6,400 acres) of serviced residential land is zoned in the four Dublin local authorities for 132,166 units).

The housing market in Ireland is nowhere near to functioning normally.  In fact, it is still largely dysfunctional for several reasons:

• extensive mortgage arrears and negative equity
• the lack of mortgage credit and a large proportion of cash buyers
• the lack of finance for development and the lack of active developers
• oversupply in most of the country and pockets of undersupply in specific locales (particularly family homes in parts of Dublin)
• large numbers of unfinished estates and poor build quality (issues of pyrite, etc.) that need to be retrofitted
• huge numbers on the social housing waiting list and stalled regeneration schemes

The shortage of family homes in some parts of Dublin is just one aspect of a very unhealthy housing landscape.  What we really need right now is not a knee-jerk reaction but a proper housing strategy that guides addressing the various problems facing the Irish housing market and plans future housing provision.

This housing strategy needs to do a full assessment of the issues above, along with suggested solutions that include planning and finance, plus develop models of where new housing might need to be built given expected demand based on trends in demographics, economic conditions and labour market change.  Together, these assessments should be used to map out a plan of action as to getting the Irish housing back in to some kind of order.

This strategy does not need to be years in the making.  With some coordinated action it could probably be prepared in a few weeks using in situ expertise and resources.  What it does require, however, is some government action to spearhead such an initiative.  Without this, how the housing situation unfolds will be ad hoc, uncoordinated, and likely to reproduce and extend the present problems.

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

 

Residential property prices 2006-2012

The latest installment of the CSO Residential Property Price Index was released this morning.  AIRO has updated its interactive graphing tool of the house prices to include the new data (see below).  The tool allows you to explore the performance of the housing market from 2006 to July 2012 including index scores, annual change and overall change from the market peak. Properties can be viewed by type (house/apartment) and by crude geography (nationally, Dublin and nationally excluding Dublin).  As we detailed a month ago, care needs to be taken in interpreting the data for a number of reasons.  Nonetheless, the headline figures are that house prices fell nationally by 13.6% in the year to July compared to a decline of 14.4% in the year to June. In the month of July prices increased by 0.2% nationally representing a very slight improvement in comparison to June 2012 which reported a 1.1% decrease in the month.  In Dublin property prices fell by 0.3% in the month and 16.6% in the year to July, while apartments were the worst performing and were 19.6% lower than July 2011.  Prices outside Dublin rose by 0.3% in the month and were 12.1% lower than the same period in 2011.

Eoghan McCarthy and Rob Kitchin

 

What to make of the property price data?

The CSO’s residential property price index for June was published yesterday.  After a slight rise of 0.2% in prices nationally in May, the index fell by -1.1% in June.  So after the speculation in the media that property prices might have levelled off, especially in Dublin, it’s back to wondering when they might bottom out.  Last month we argued that we would need 6-9 months of prices staying even or rising slightly before the bottom could be called, that the rise was very marginal at 0.2% and prices were still falling for apartments, and pointed out that as prices have fallen since the peak in 2007 they have gone through periods where the drops have slowed down before falling again (see the interactive graph produced by AIRO).  In other words, not too much should be read into last month’s data as we need a time-series of data before we can talk about a trend with confidence.

There are also other reasons to be cautious about interpreting the data, which are based on mortgage transactions by eight lenders and constitute a three month rolling average.   Here are five of them.

First, because the market is so weak the number of transactions per month is relatively small.  Second, those transactions relate to a market that is not representative of the full range of stock that would be open to the market in normal conditions.  The present market contains a lot of distressed stock and many homeowners are keeping their properties off the market whilst prices are falling.  Third, as yet, the index does not include cash sales which the property sector are suggesting account for up to 30% of the market.  Fourth, due to the first three reasons the CSO itself warns that the index is subject to short-term volatility (“care should still be taken when interpreting monthly figures which may indicate short-term volatility rather than underlying change in longer term price trends”).

Fifth, the data are very circumscribed geographically providing an overview at the national scale, for Dublin only, and nationally excluding Dublin.  The housing market is geographically segmented and becoming more so in the crash.  Areas vary in the type and quality of stock available.  They have varying economic conditions, labour market activity and rates of unemployment.  They have different demographic trends, with some areas experiencing out-migration.  Those looking to buy in different areas have varying access to mortgage credit and some areas are redlined (it is just about impossible to get a mortgage for an apartment outside the four principle cities).  Areas have different rates of oversupply.  Housing vacancy is above 10% just about everywhere except Dublin, Kildare and Meath.  Apartment vacancy is above 18% everywhere and above 40% in a number of local authorities.  As constituted, the CSO index tells us very little with respect to how the market is spatially segmented.  The best data we have for that is the AIRO/DAFT house price mapping tool that provides asking price data 2007-2012 for 2, 3, 4 bed properties for c.1100 areas.  What that data shows is that the range of asking price drops varies from -35% to -65% across the country dependent on the factors above.

So where does that leave us?  Basically, as the CSO itself notes, care needs to be taken when interpreting the RPPI.  Whilst the index provides us with a good long-term overview of the trend in prices nationally and in Dublin, we should be careful not to read too much into monthly figures without putting them into the context of the longer trend and the various limitations with the data.  Moreover, we should be careful about drawing conclusions about local prices from the generalized large-scale aggregations (a classic ecological fallacy issue).  As the AIRO/DAFT data illustrates, National/Dublin aggregated figures are hiding a lot of local variability.  Hopefully, the new house price register might help, though it will not extend back to the peak in 2007 (it will start with 2010).

What is clear from the long-term trend is that prices have fallen substantially from the peak and they are still very fragile and are liable to fall further.  It is only with a run of data where prices are level or rising that the bottom can be called (and the depth of the bottom and its timing will vary around the country depending on the factors above).  Any attempt to call the bottom before then and to talk up the market will be premature.

Rob Kitchin

 

Daft.ie/AIRO property value interactive map tool

Today marks the launch of the Daft.ie/AIRO property value interactive map tool, put together by Ronan Lyons (Oxford University) and Justin Gleeson (AIRO/NIRSA, NUI Maynooth). The system provides the first, detailed localised view of the property market in Ireland based on 1.1 million daft.ie property records (the CSO residential property price index divides the data into national and Dublin only).

Importantly, it provides comparable data from 2007-2012, allowing us to see the change in sales and rental prices and expected yield over the course of the crash for 2, 3 and 4 bed properties (the new government house price database when it is released will only provide data concerning 2010 onwards). Sales data is provided for 1,117 areas, rental data for 312 areas, and yields for 4,509 areas. The method for calculating the average price per area is set out in this paper by Ronan Lyons.  The methodology used makes each area comparable by controlling for differences in properties (such as type and size), and it should be noted that each area covers a range of locales and provides an average drop in price.

The tool is fully interactive and free to use; to access it go to www.daft.ie/research  To get detail on any area click on it and a pop-up box will appear providing data about that locale.  Scroll down the pop-up box to see a graph relating to the area.  If you hover over the bars in the graph the specific data will appeal.

The data is broadly in line with the CSO data re. total price drop, but shows the variance across the country. Nearly all areas in the range -40 to -60% (a reasonably large range).  A few areas are above -60%, and a few below -40%.  What the data reveals that there are local markets operating across country reflecting local conditions.  Whilst the data are asking prices they are very strongly reflective of actual sales price (which the property sector generally reports as being between 10-15% less than asking price) and shows relative prices and change across country as the data is consistent across space and time.

Hopefully the server will hold up this morning as people try out the tool.  If you have difficulty getting access, please try again later.  Also check out the dozens of other mapping and data visualisation tools on the AIRO website.

Rob Kitchin (@robkitchin) and Justin Gleeson (@AIRO_NUIM) (Ronan is on twitter at @ronanlyons)

 

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

 

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