This morning has seen the publication of the fourth CSO residential property price indices forIreland. 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 June 2011. Here’s the summary showing the index at its peak, November 2009 (the NAMA valuation date), June 2010 (12 months ago), December 2010 (end of year, start of this year) and June 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 peak price nationally in February 2007 was €313,998, in Dublin in April 2007 was €431,016 and outside Dublin 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 €182,142
Dublin, would be €221,436
Outside Dublin, would be €163,955
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 historical indices, closely correlates with performance of the CSO indices.
What’s surprising about the latest release? After recording an increase of 0.3% in May 2011, houses inDublin declined by 2.4% in the month of June 2011 alone. OutsideDublin, property fell by a more modest 1.9-2% and the expectation is that the country has some way to decline, to bring it in line with cumulative declines inDublin.
Are prices still falling? Yes and the pace of decline shows no signs of easing. A 2.1% decline nationally in the month of June 2011 and an annual decline of 12.9% are both worse than last month.
How far off the peak are we? Nationally 42%. Interestingly, as revealed here two months ago,Northern Ireland is some 44% from peak. Are forbearance by mortgage lenders, a draconian bankruptcy regime and NAMA’s (in)actions 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, drop me a line if you think there are any omissions.
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. Residential prices are now down 19.4% from November, 2009. The latest results from the CSO bring the index to 856 (16.9%) meaning that NAMA will need see a blended average increase of 16.9% in its various property markets to break even at a gross profit level.
NAMA Wine Lake 
Pg 18 of the CSO doc shows a table “Coverage of stamp duty returns versus mortgage drawdown returns 2005-2009”.
The percentage coverage for 2009 is 94%. This seems extemely high. Perhaps there is a lag on one of the datasets. But here’s my dodgy inferred question: where have all the cash buyers gone?
Extrapolating a good deal, it suggests that prices are still credit fuelled and are currently too high to attract cash buyers.
@Ahura, 2009 was 19 months ago, and also cash buyers at the start of 2009 might have been 2% and 12% by the year end. Also cash buyers might be more focussed on value, and may have concluded there was an absence of realism in prices in 2009. I have asked the Revenue Commissioners for more up to date information and am awaiting a response.
I had written a longer comment but edited it down where I’d highlighted this.
In this unpublished work :) I went about defining Cash buyers as Stamp Duty Returns minus Mortgage Drawdowns. This suggests a 08-09 decrease in Cash Buyers of 91% versus a 38% decline for buyers with credit. And went on to speculate that many ‘cash buyers’ were probably people trading down rather that people with a big lump of cash. Which in turn could suggests that very substantial decreases from 2009 would be required to match cash purchasing power. Which in turn explains why I edited this out :)
What we see again today is clear proof again that we have yet to hit rock bottom in terms of house pricing going forward.We still have people who have houses priced at greatly inflated prices(even in terms of Property in the Dublin Market) and until people realise this and get real with what they expect then expect activity to reduce further and further as people who have funds available will not be involved in a market that is still inflated,and as we have people who are waiting forward for the bottom of this cycle to come.Looking forward to the 1st Distressed Property Auction taking place tomorrow in Letterkenny.Should give a clear picture of what Buyers/players are prepared to pay at Moment.Also could I say that I am disappointed with some of the views expressed here towards our Property Developers while very little is said about there masters in the Banks.
The CSO deliberately doesn’t produce average prices??
I’ve noticed that they didn’t show prices but I didn’t know it was deliberate, is there a reason for that? I think it creates opacity which should be the opposite of what they’re aiming for with their data?
Prices in Japan (which has its boom peak in 1989)
are still going down
I think Irish prices will fall for another decade as Unemployment rises, people age and young people leave for greener pastures.
Maybe they fall for two decades if oil prices go higher which is very likely.
I think that’s a realistic scenario. unless there is general … default.
Soon as possible, please. Let the creditors sort themselves out. Or not.
I still think prices won’t stop falling until we are down close to 70%