Archive for May 26th, 2010

With about 20,000 residential properties for rent at any one time, DAFT.ie is Ireland’s premier online resource for renting. On Monday, it produced its quarterly report on the rental market after examining the characteristics of the properties for rent on its own site. Despite using asking prices, it is regarded as the best and most comprehensive periodic publication dealing with the rental market in Ireland. Actual rental prices are maintained by the public sector organisation, the Private Residential Tenancies Board but they claim the Data Protection Act prevents them from publishing statistics even on an aggregated or anonymised basis. Oddly enough they do have available on their website a full list of rented residential property in the State which is available here.

So with the caveat that the research deals with rental asking prices, the current report concludes that rents are stabilising (increasing by 0.1% on average from the start to end of Quarter 1, 2010 and within that average there is some evidence of asking price increases). This entry examines the recent history of rental prices and compares rental prices with property prices. Here is a graph of rental asking prices versus property settled prices (capital values) since January 2002 (that’s as far back as DAFT.ie has produced data). The rental line shows the DAFT.ie national rental index. The property line shows the Permanent TSB/ESRI national house price index – this was produced on a monthly basis upto December 2009 but is now quarterly – I have smoothed the Q1, 2010 decline in prices by averaging the quarterly drop and equally dividing the drop between each of the first three months. The third line is the ratio, the rental index divided by the house price index. This is an attempt to show movement in rental yields though plainly a rental index divided by a property index will not be meaningful in terms of absolute values produced but the movement is interesting.

I think we can divide our past into four segments.

From 2002 – mid 2007. capital values were rising consistently though from the start of 2005 at a less breakneck rate. The ECB rate fell from 3% to 2% over the period. Rents were declining until mid 2004 and then started to slowly rise but did not keep pace with capital rises (evidenced by the ratio continuing to decline from mid 2004 to mid 2007).  Arguably what was happening here is that landlords were subsidising rents with capital appreciation ie if your house is worth 100 at the start of the year but 110 at the end then if rent is only 1, you still make a return of 11% even though the yield is 1%.

Mid 2007 – Mid 2008. capital values were dropping sharply and rental prices were rising rapidly. The ECB rate went from 2% to 4%. This may be because landlords were no longer looking to capital appreciation to subsidize rental income or because they could no longer release equity from their property which was dropping in value or they were reacting to higher interest rates.

Mid 2008 – End 2009. capital values continued to drop sharply and rental prices dropped at a similar rate evidenced by the ratio staying stable. This was a period when unemployment was rising rapidly and wages came under pressure through income levies and private sector cuts. The ECB rate fell from 4% to 1%.

End 2009 – present. Capital values continued to drop at a reduced rate compared with the last quarter of 2009. Rental prices stabilised. And the ratio has begun to climb strongly. Although unemployment is at a high level, it is stabilising. Domestic bank variable interest rates are rising.

The short term future. Apart from our Minister for Finance, it is difficult to find commentators who are predicting short-term rises in capital values. Most commentators appear to be predicting double digit falls from present levels. Looking at the ratio over the past eight years we are 20% off the floors reached at the height of the boom in 2007 but we are some 50% off the ratio before the boom started in 2002. Of course our economic circumstances (GDP growth, employment) were better then and we were still enjoying net inward migration. So my prediction is that rents will outperform capital values by either rising modestly (if capital values drop modestly in price) or falling at a lesser rate than the fall in capital values if capital values drop more dramatically.


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Deputy Joan Burton yesterday submitted yet another question to the housing Minister Michael Finneran asking for an update on progress on the creation of the House Price Database, a commitment made yet again in the FF/Green Programme for Government in October 2009. And yet again she has received a non-answer identical to non-answers given in April 2010, February 2010, January 2010 and December 2009. Her question and answer are shown at the bottom of this entry.

We learned through the media in March 2010 that the DoEHLG was consulting with interested parties and indeed there has been talk of a working group. The IAVI was the only named private sector organisation that is party to the talks and a member of the group, and if I were a member of the IAVI, I would be more than a little upset at my organisation being apparently used to provide a fig leaf of credibility to government claims that it is in any way progressing the creation of the HPD. Of course it may be the case that some members of the IAVI already have effective access to a House Price Database – as part of their work on NAMA valuations, it may be the case that actual transaction prices are retrieved to assist with producing a valuation that has the best market information underpinning it and thereby protecting the NAMA investment on the taxpayers’ behalf. However many members of the IAVI are not engaged by NAMA and they might be worried at their loss of competitiveness if it is indeed the case that rival firms do have access to transaction information.

It is unclear why there has been no apparent progress with introducing an HPD, though of course there has been speculation that it is for sinister reasons and that revealing the owners of certain property and the price paid may give rise to uncomfortable questions for the government which has been in power for 13 years and which was the Decisionmaker-in-Chief during the property boom when colossal sums of money were made.

The government might say that it is consulting but it would appear that there is no timeline for “consulting”, no terms of reference, no departmental support (financial or legal for example). So can the government say that it is progressing the creation of the HPD in any meaningful way?

What next for the HPD? It is to be hoped that our Opposition parties will not abandon the creation of the HPD and will continue to harry the government for action, either individually or co-operating. Whilst the position of quangoes may  be compromised when it comes to independent action like criticising your paymaster, it is to be hoped that private sector organisations like the IAVI and CIF will vociferously call for progress. And if individuals are aware of suspicious land transactions, they might do worse than bring them to the attention of Opposition deputies and senators.

Question 364
Chun an Aire Comhshaoil, Oidhreachta agus Rialtais Áitiúil:
To the Minister for the Environment, Heritage and Local Government:                                                        

To ask the Minister for the Environment, Heritage and Local Government further to Parliamentary Question No. 30 of 22 April 2010, the timeline for the creation of a comprehensive house price database, as foreseen in the Programme for Government; and if he will make a statement on the matter.
– Joan Burton.

For WRITTEN answer on Tuesday, 25th May, 2010.

Ref No:   21822/10    


Minister of State at the Department of the Environment, Heritage and Local Government (Mr. M. Finneran):

The renewed Programme for Government sets out a clear commitment to create and maintain a comprehensive House Price Database based on sales prices.

My Department has met with a broad range of interested parties in regard to the shape that such a register might take, and recommendations arising from this process will be made to Government shortly. The timing of the establishment of the register will be determined by a range of factors including the possible need for amendment of the Data Protection Acts to allow for publication of achieved sales prices.

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