This morning has seen the publication of the third CSO residential property price indices for Ireland. The inaugural series was published by the CSO on 13th May 2011 and covered the period from January 2005 to March 2011. This morning’s release covers the month of May 2011. Here’s the summary showing the index at its peak, November 2009 (the NAMA valuation date), May 2010 (12 months ago), December 2010 (end of year, start of this year) and March 2011.
Now that the Permanent TSB/ESRI has abandoned its quarterly house price index, the CSO isIreland’s premier index for mortgage-based transactions. Mortgage transactions at eight financial institutions are analysed : Allied Irish Banks, Bank of Ireland, ICS Building Society (part of the Bank ofIrelandgroup), the Educational Building Society, Permanent TSB, Belgian-owned KBC, Danish-owned National Irish Bank and Irish Nationwide Building Society. The index is hedonic in the sense it firstly groups transactions on a like-for-like basis (location, property type, floor area, number of bedrooms, new or old and first
time buyer or not) and then assigns weightings to each group dependent on their value to the total value of all transactions. The index is an average of three-month rolling transactions.
As for the key questions:
How much does property now cost in Ireland? The CSO deliberately don’t produce average prices. The former PTSB/ESRI index did and claimed the average price of a property nationally at peak in February 2007 was €313,998, in Dublin at peak in April 2007 was €431,016 and outside Dublin at peak in January 2007 was €267,987. If, and it is a big “if”, you were to take PTSB/ESRI figures as sound and comparable to the CSO series, then the average today nationally would be €185,993, in Dublin would be €226,884 and outside Dublin would be €167,075. I don’t think the CSO would be happy with this approach but it seems to me that the PTSB/ESRI series as represented by its indices closes matches the performance of the CSO indices.
What’s surprising about the latest release? Houses in Dublin increased by 0.3% in the month of May, the first increase since August 2010. Odd enough apartments in Dublin fell 0.3% in the month yet all Dublin property is up 0.4% (a query has been lodged with the CSO). Outside Dublin all property fell by 2.1% in the month which would equate to more than 24% annually – has the long awaited provincial catch-up started?
Are prices still falling? Yes generally but with the single exception of Dublin houses. Property nationally fell by 1.2% in the past month (up from 1% in April 2011), 6.5% since the start of 2011 and 12.2% since May 2010 (same as the 12-month drop last month). Dublin houses increased by 0.3% in the past month, but all other categories continue to show declines with non-Dublin property showing a significant monthly decline of 2.1%
How far off the peak are we? Nationally 40.8%%. Interestingly, as revealed here last month,Northern Ireland is some 44% from peak. Is forbearance by mortgage lenders, a draconian bankruptcy regime and NAMA distorting the market. Or are cash transactions which are not captured by the CSO index so significant today that if they were captured, the decline in the Republic would be even greater?
How much further will prices drop? Indeed, will prices continue to drop? Who knows, I would say the general consensus is that prices will continue to drop. This is what I believe to be a comprehensive list of forecasts and projections for Irish residential property.
What does this morning’s news mean for NAMA? The CSO index is used to calculate the NWL Index shown at the top of this page which aims to provide a composite reflection of price movements in NAMA’s key markets since 30th November 2009, the NAMA valuation date. The latest results from the CSO bring the index to 884 (13.1%) meaning that NAMA will need see a blended average increase of 13.1% in its various property markets to break even at a gross profit level.
NAMA Wine Lake 
@NWL
“Houses in Dublin increased by 0.3% in the month of May, the first increase since August 2010. Odd enough apartments in Dublin fell 0.3% in the month yet all Dublin property is down 0.4% (a query has been lodged with the CSO).”
Should read “Dublin property is up 0.4%”. Here is what the CSO release stated:
“In Dublin residential property prices increased by 0.4% in May …….. Dublin house prices increased by 0.3% in the month ………Dublin apartment
prices fell by 0.3% in the month of May ……”
Something appears wrong with the CSO assessment.
@Brian yes, Dublin property is indeed up 0.4% and that boo-boo has been corrected. The CSO is quite good on its numbers and it assures that its assessment is correct, that is even though apts are down 0.3% and houses up 0.3%, overall all property is up 0.4%. I hope to have illustrative numbers shortly which might help understand how this counter-intuitive result can come about.
NWL,
Did you say the index is a 3mth moving average? So a horrid Dublin month might have fallen off even if the was an actual month on month decline.
The anomaly whereby the overall dublin market is up 0.4%, while houses are up 0.3% and apartments are down 0.3% can be easily explained by a marginally greater proportion of the transactions in May being Houses, as compared to April.
Simple makey-uppey numbers to illustrate this…
50 Houses sold in April at average €200,000
50 Apartments sold in April at average €100,000
100 Housing units sold in April at average €150,000
50 Houses sold in May at average €200,600 (+0.3%)
49 Apartments sold in May at average €99,700 (-0.3%)
99 Housing units sold in May at average €150,660 (+0.4%)
More important than demonstrating that the published percentages can in fact be correct, is how insignificant they are in the real world even if analysis and comparison of the property transactions in April and May was 100% accurate in their reflection of the overall property market, which it can’t possibly be given the continued standoff between buyers and sellers and consequent low levels of transactions.
@[BM] Many thanks for that. The CSO has responded and I hope that their reply can be posted shortly but I believe changes in the mix are taken into account (though your example above would show what can happen if changes to the mix weren’t taken into account ). The anomaly appears to result from the fact that the figures each month are 3-monthly moving averages but please bear with me, the CSO responded practically immediately yesterday and I just need work through their example.