Irish residential property prices – Q3, 2011 roundup

As we now have the usual quarterly troika of Irish residential property price surveys from DAFT.ie, Myhome.ie and Sherry FitzGerald, this entry is a roundup to see what the surveys are telling us. Here’s the overview.

(1)  At a national level, prices dropped 3-5% in quarter three of 2011 and 14-17% in the last year and are now 42-58% down from peak.

(2) In Dublin, prices dropped 4-5% in quarter three and 15-18% in the last year and are now 48-62% down from peak.

(3) DAFT.ie and Myhome.ie both provide 26-county-by-county results.

(3a) DAFT.ie says that for Q3, 2011, Roscommon recorded the biggest decline with prices dropping 7.8%. On the other hand, prices in Monaghan rose by 12.3% in the quarter.

(3b) Myhome.ie says that for Q3, 2011, Offaly recorded the biggest decline with a whopping 18.85% (32% in the past 12 months). Unexpectedly perhaps, prices actually rose in Q3, 2011 in Carlow and Monaghan, by 5.7% and 2.3% respectively. And prices in Monaghan have risen by 24.3% in the past year!

In terms of how the different sources compile their statistics this is what each has to say.

(1) DAFT.ie : Its index is based on properties advertised on Daft.ie for a given period. The national average is built up from Census weights per county, in effect ensuring the average reflects where people live, not any variations from that that may exist in Daft’s market share. The regressions used are hedonic price regressions, accounting for all available and measurable attributes of properties and only coefficients with a very high degree of statistical significance (p < 0.001) are used. The average monthly sample size for sales during 2009 was over 10,000. Indices are based on standard methods, holding the mix of characteristics constant, with the annual average of 2007 used as the base. A working paper on the methodologies employed in both rental and sales markets will be published on the Daft.ie website soon. Stock and flow statistics are calculated using consistent series for the period covered. The change to the national average price is built up from Census weights per county, in effect ensuring the average reflects where people live, not any variations from that that may exist in Daft’s market share.

(2) Myhome.ie : Its index is based on actual asking prices of properties advertised on MyHome.ie with comparisons by quarter over the last six years. This represents the majority of properties for sale inIreland from lead­ing estate agents nationwide.  The series in this report have been produced using a combination of statistical techniques. Their data is collected from quarterly snapshots of active, available properties on MyHome.ie. Their main National andDublin indices have been constructed with a widely-used regression technique which adjusts for change in the mixture of properties for sale in each quarter. Since the supply of property in each quarter has a different combination of types, sizes and locations, the real trends in property prices are easily obscured. Their method is designed to reflect price change independent of this variation in mix.

(3) Sherry FitzGerald : Its index is based on the analysis of a basket of properties in its locations nationwide.  Commencing in 1996 in theDublin market, it was extended nationwide in 1999. Each basket of properties was chosen based on a weighted profile of properties in each location.  The basket extends to over 1,500 properties, which are re-valued on a monthly basis forDublin properties and a quarterly basis for nationwide properties with results produced quarterly. The basket is held constant and re-valued based on market evidence.  Sherry FitzGerald through its franchise network is represented in every major city, town and county inIreland.

So two of the above are asking price indices and the Sherry FitzGerald index is a valuation assessment index (akin to how SCS/IPD and JLL compile the commercial property indices as far as I can see)

In addition to the above surveys, Ireland has two actual sale price series, one from the Department of the Environment Housing and Local Government which is an atrociously crude average of mortgage transactions and is issued six months after the event; the other is new and is from the CSO and is issued monthly and is an hedonic index but only based on mortgages at eight Irish lending institutions. The bill giving legislative effect to House Price Database  – called the Property Services (Regulation) Bill – is set to be debated in the Oireachtas later in October 2011 and might mean we get actual prices for all transaction, cash and mortgage, in the not-too-distant future but since we have been waiting for a register since at least 1974 when the Kenny Report recommendation was accepted by all, I wouldn’t hold my breath, though at least the IMF will be breathing down our politicians’ necks to deliver on what is a Memorandum of Understanding commitment

In terms of outlook for property prices, who knows? “Challenging” is how I would describe the consensus opinion. Ronan Lyons, economist at DAFT.ie points to credit availability, a housing supply overhang and current-market rents continuing to apply downward pressure on prices. Annette Hughes of DKM who provides an economic analysis for the Myhome.ie survey, sees the European debt crisis continuing to hang over our domestic market, though she does point out thatIreland’s economy notched up an impressive second-quarter GDP/GNP growth. Marian Finnegan, economist at Sherry FitzGerald predicts a fall in interest rates and an increasing significance of cash buyers reflected in registrations with the estate agency.

These are the latest predictions/projects captured on here which I believe to be a comprehensive reflection of reported predictions and projections, though if you feel there is any omission, please contact me so that I can update the table; house price projections in Ireland can be a vexed subject!

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“In four years time … we’ll have paid back everyone and we’ll be laughing” – Harry Crosbie and NAMA

Entrepreneur, impresario and developer Harry Crosbie made an appearance on RTE’s “The Saturday Night Show” with Brendan O’Connor over the weekend (the programme is available here from RTE until 22nd October, 2011). Harry’s contribution starts from about 19:00 minutes in and from about 24:00 he talks about his dealings with NAMA.

Harry is responsible – either in his own right or with others – for the development of significant buildings in the docklands area of central Dublin, including the Point Village on North Wall Quay, the Grand Canal Theatre, the National Convention Centre, the Dublin Eye, the Gibson and Clarence hotels and developments on Vicar and Creighton streets. His home which he describes as “a warehouse” is on Hanover Quay. “Not a bad gaff” is how presenter Brendan O’Connor described it.

Known for his optimism and chutzpah, Harry was his usual up-beat self in his contribution. Not a man for missing an opportunity either as he publicly called on Dunnes Stores to honour what Harry called a “commitment” given in court to Mr Justice Frank Clarke to occupy one of his developments. He expressed gratitude to NAMA for further financial assistance which is helping to complete his developments and sustain employment. Harry said that “in four years time we’ll be flying and buzzing and we’ll have paid back everyone and we’ll be laughing”

Brendan challenged Harry on this last point, and reminded Harry that with commercial property having declined two thirds from peak – the Q2, 2011 Irish indices showed drops of 63-64% and the Q3, 2011 indices due out shortly are expected to show further falls – Brendan asked, how could Harry hope to repay what he originally borrowed.

“The money we’re going to pay back is what they [NAMA] paid; that’s the only money” said Harry and Brendan confirmed that might be 40c in the euro on the basis that NAMA has, on average, applied a 58% discount to loans acquired. Harry didn’t know what NAMA had paid for his loans but agreed with the gist of that. “We’re going to pay back what they [NAMA] paid; that’s what’s going to happen in the real world” said Harry. When probed further by Brendan as to what happens to the difference between the value of the loan at the original bank and what NAMA paid – the difference being commonly referred to as the “haircut” – Harry said “that’s gone..and it’s not coming back”.

“Are you worried that you’ll lose your house” asked Brendan. “No” said Harry resolutely “I’m absolutely confident that this will turn, the platform for recovery is actually there at the moment, it’s just that we can’t just see it yet”

How much does Harry owe NAMA? €500m suggested presenter Brendan. “No, it’s not that” asserted Harry. But set against the background of the above, Brendan might have gone a little further and asked if Harry was now regarding his debt as the price paid by NAMA for his loans or the original value of the loans.

Being a Saturday night entertainment show, Brendan could be forgiven for not asking Harry if NAMA had approved his business plan, and if he (Harry) had signed an agreement with NAMA, whether or not Harry’s loans are subject to personal guarantees, if Harry’s wife Rita had benefitted from spousal transfers and if NAMA was pursuing these, Harry’s salary from NAMA and if there was a performance bonus. These are all contentious and at some point will need be teased out, so that we can see how NAMA is practically dealing with its debtors.

UPDATE: 8th February, 2012. Anglo (or rather the Irish Bank Resolution Corporation, IBRC) has appointed receivers to a company in which Harry has a major stake. The bank is reported to have appointed David Hughes and Luke Charlton from Ernst and Young as share receivers to a company called Tora Company Limited, which is said to have been jointly controlled by Harry Crosbie and the Treasury Holdings dynamic duo, Richard Barrett and Johnny Ronan. The controlling company is called Brossbar Limited.  Tora’s main asset appears to be the Wool Store building – pictured here – in Dublin’s International Financial Services Centre in Dublin 1.

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