Archive for October 5th, 2010

I would like to thank a regular commentor on here, Who Shot The Tiger, for his recollection of the story from Plato’s The Republic – the story is told through an exchange between Plato and his older brother Glaucon and presents a situation where a group of slaves are tightly shackled in a cave facing the back of the cave, and their only view of the world is shadows projected on the back of the cave by the sunlight. And whilst so shackled, it is impossible to discern what is going on in the world and they don’t know if they’re seeing the world or indeed themselves casting shadows. One of their number is rescued from his slavery and is shown the outside world and comes to see how ignorant he was in his former life. Well done to Who Shot The Tiger for giving the blog a classy slant!

On the other hand, I would probably use a more modern culture analogy to illustrate a similar point in a more crude way. Remember the 1970s film, Midnight Express, where the hapless American gets imprisoned in a brutal Turkish prison for trying to smuggle heroin out of the country. Several years into the prison sentence, he gets a visit from his girlfriend and on the other side of a glass screen in a visiting area, he begs to see her breasts and for her to press them against the screen. The poor prisoner is reduced to a sorry condition in pleasuring himself.

What brings the “hero” from Midnight Express to mind is the feeling I get when property price information is published for Ireland. Today sees the release today of the DAFT.ie, Myhome,ie and Sherry Fitzgerald reports on house prices for Q3, 2010 and we’re as close to the real thing as our friend in the Turkish prison (apologies for male-centric image, but I hope everyone gets the point). The reports are based on asking prices (DAFT.ie and Myhome.ie) or on a very small sample (Sherry Fitzgerald). In fairness to them all, but to DAFT.ie in particular, they do explain that their analysis is based on asking prices. Ronan Lyons is an economist with DAFT.ie and has explained on countless occasions that although the report is based on asking prices, there is a strong correlation between the DAFT.ie report and the two official house price series (the Permanent TSB/ESRI hedonic quarterly index based on mortgage transactions and where PTSB has less than 20% of a mortgage market that saw a total of just 1,000 new mortgages granted in each of Q1 and Q2, 2010 and the State’s own rubbish, the DoEHLG house price averages which is produced six months after the event and it doesn’t make any attempt to compare increases or decreases on similar properties – it is a crude average that treats a €50m sale on Shrewsbury Road as one sale and €60k studio flat in Ballymun as another sale giving you an average of €26,030,000).

Justice Minister Dermot Aherne has promised legislation for a House Price Database (HPD) before Christmas 2010. You can find all the latest news on developments here. The HPD was called for in the Kenny Report in 1973, and despite public support has never made it into law. Everyone seems to be clamouring for the database and even the government seems to be acknowledging that the downturn will overshoot in the absence of a credible database.

With respect to the three reports today

(1) DAFT.ie report that asking prices have dropped 3.7% in Q3 (to be clear that’s the average of the index in M4,M5,M6 2010 compared with the average for M7,M8,M9 2101), that supply of homes for sale remains at record levels, that Dublin has dropped by 1.8-4.4% and at the extremes Cavan has risen by 1.4% and neighbouring Longford has dropped by 9.9%.  We are presently off peak by about 40%. It takes about 4-6 months between when a city home is first entered for sale on DAFT.ie and when it is withdrawn or marked sale agreed. And in Leinster it is 8 months.

(2) Myhome.ie report that asking prices are down 3.9% in Q3 and that Dublin fell by 4.3%. Their reports which are in PDF format kept crashing and failed to open on my computer.

(3) Sherry Fitzgerald say prices are down 2.7% in Q3 and that Dublin fell by 2%. NAMA is referred to in the context of providing some steer on prices.

As for outlook, the three sources appear to be claiming there is some moderation in the recent pace of declines and are muted where there is any reference to outlook. Lastly, and missed on here last week, was the speech by Jones Lang Lasalle managing director John Moran addressing the 2010 Corporate Restructuring Summit. According to Laura Noonan’s report in the Independent he said “If you think we’re at the bottom of the property market in Ireland, we don’t believe that for a moment,”  and the report goes on to say “adding that his agency believed house prices had actually fallen by 60pc and not the 30pc suggested by some indexes.”


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