“December’s decrease in both the Dublin and national indices produced by the CSO is unfortunate news. For Dublin, it is absurd and totally out of line with what is happening on the ground. The declines are due to how the index is constructed. It is based on mortgage drawdowns and totally ignores cash buyers who account for 45% of all sales nationally and an even higher percentage in Dublin. Obviously this has to skew the results.” Aoife Brennan, Head of Research at Lisney
Well, the release of the December Irish residential property indices by the Central Statistics Office this morning has certainly thrown the cat amongst the pigeons. After an impressive monthly increase of 2.7% in Dublin in November 2012 which formed the basis for a good many “recovery” headlines, we have a 1.7% decline in December 2012. Lisney, one of the country’s main estate agents and part of the Cushman Wakefield global family, issued a statement in which it described the results for Dublin as “absurd”. The CSO indices exclude cash sales which Lisney convincingly claims represents 45% nationally and even more in Dublin, and Lisney claims this has to skew the results.
But I wonder.
If an estate agent sells no 1 Acacia Avenue for €250,000 to a mortgage buyer and no 2 to cash buyer for €220,000, what will no 3 Acacia Avenue which is identical sell for? If it’s a mortgage buyer, then the bank or building society will require a valuation, and given the estate agent knows the two sale values of nos 1 and 2, how will they value no 3 for the mortgage provider? And of course with the new Property Price Register, estate agents no longer have a monopoly of all market prices, cash and mortgage -we can all hazard a guess, though it will still generally be estate agents who are familiar with the details of property sold. But the point is that cash shouldn’t skew the market very much because mortgage companies must adjust their own valuations in light of all transactions – cash and mortgage.
It might be that December 2012 was just a blip, and the CSO does indeed warn against reading too much into any one month’s figures. All Dublin estate agents appear to be suggesting a firming up of prices in Dublin – they may be dismissed by some as scoundrels who have skin in the game and need stable or rising prices to drive transactions. But maybe we should see what the CSO index and the Daft.ie index tell us over a number of months.
Lisney seems to be in no doubt and is emphatic about the outlook for Dublin “Despite what the CSO indices are showing, we believe that the improved level of activity in 2012 has fed through into rising prices, particularly in the prime city areas. In 2013, we are of the view that prices in Dublin and other city areas will increase further and it will be the cash buyers who drive this.”