This morning has seen the publication of the CSO residential property price indices for Ireland for January 2012. Here’s the summary showing the indices at their peak (various months in 2007 depending on type of property and location), the NAMA valuation date (November 2009), annual (December 2011), last month (December 2011) and January 2012
Now that the Permanent TSB/ESRI has abandoned its quarterly house price index, the CSO’s isIreland’s premier index for mortgage-based transactions. It analyses mortgage transactions at eight financial institutions : 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.
Cash transactions: there is increasing concern that although the CSO captures data from the mortgage market, it omits cash transactions. The latest figures from the Revenue Commissioners are for 2009 which show that just 6% of transactions (by volume) were in cash. Last week, estate agents DNG claimed that cash made up one third of the market. At the start of January 2012, Sherry FitzGerald said that 29% of its registered buyers were cash buyers, and mortgage expert Karl Deeter said on here that “what Mark Fitzgerald [of Sherry FitzGerald] said at the AIB meeting in December (we were at the same table) is that 30% of purchases were cash – I’d take that as being completions unless this is a case of crossed wires”. In addition, the Sunday Independent reported the former acting CEO of the Irish Auctioneers and Valuers Institute saying that “I would say a quarter of deals at present are being done in cash”. The Allsop Space auctions won’t be representative of the general market but the latest analysis from it says that almost three quarters of its auction transactions were in cash. The CSO expects to have monthly data from the Revenue Commissioners from mid-2012 and it expects that it may subsequently be able to show the market size with its monthly release of the residential index. The perception is that cash transactions will be at keener prices than mortgage transactions because the buyer can move quickly and doesn’t need credit. If that perception is correct then the CSO may be understating – and potentially, understating substantially – the decline in prices.
As for the key questions:
How much does property now cost in Ireland? The CSO deliberately doesn’t produce average prices. The former PTSB/ESRI index did, and claimed the average price of a property nationally hit the peak in February 2007 at €313,998, inDublin in April 2007 at €431,016 and outsideDublin in January 2007 at €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 these would be the average prices today:
Nationally, €162,653 (peak €313,998)
In Dublin, €186,827 (peak €431,016)
Outside Dublin, €151,471 (peak €267,987)
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 the performance of the CSO indices.
What’s surprising about the latest release? Apartment prices nationally were down 4.3% in the month of January 2012. Prices inDublin took a battering again, with house prices down 4.1% in the month and apartment prices down 3.5%. Price drops outsideDublin continue to be more modest, with non-Dublin houses down by just 42.7% compared withDublin houses of 55.4%.
Are prices still falling? Yes, and the 1.9% monthly decline nationally in January 2012 is up from the 1.7% decline in December 2011 and 1.5% decline in November 2011 but in the same range as the 2.2% decline in October 2011, the 1.5% decline in September 2011 and the 1.6% decline in August 2011.
How far off the peak are we? Nationally 48.2% (49.8% in real terms as inflation has increased by 3.2% between February 2007 and January 2012). Interestingly, as revealed here,Northern Ireland is some 45.2% from peak in nominal terms and 52.6% off peak in real terms. Are forbearance measures 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 at all? Who knows, I would say the general consensus is that prices will continue to drop. You might find the DAFT.ie 2012 Consumer Attitudes Survey published today of interest though its scientific accuracy is questionable. This is what I believe to be a comprehensive list of forecasts and projections for Irish residential property [house price projections in Ireland are contentious for obvious reasons and the following is understood to be a comprehensive list of projections but please 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 28% from November, 2009. The latest results from the CSO bring the index to 828 (20.7%) meaning that NAMA will need see a blended average increase of 20.7% in its various property markets to break even at a gross profit level.
The CSO index is a monthly residential property price index. Ireland does not yet have a publicly available register of actual sale prices, but one is expected in mid-2012 following the passing of legislation last year – read the latest on the House Price Register here. There are three other residential price surveys, based on advertised asking prices or agent valuations – for the latest see here. Lastly the Department of the Environment, Community and Local Government produces an index based on mortgage transactions, six months after the period end and not hedonically analysed, it is next to useless.
NAMA Wine Lake 
“You might find the DAFT.ie 2012 Consumer Attitudes Survey published today of interest though its scientific accuracy is questionable.”
Given it’s the same method as, for example, the ESRI surveys of Consumer Attitudes from 2003-2008, I’d be curious to hear why you think it’s questionable. I would agree that a lot of interpretations I’ve seen so far are certainly questionable, in particular using it as a gauge of what proportion of the population wants to buy.
There is lots in the survey for those willing to look, particularly given the large sample size (2,000). The survey reveals what those active in the property market at the moment believe about how far prices have fallen nationally and locally since the peak, and what they think will happen prices over the coming 12 months and over the coming five years. It asks them why they think that and why they plan to defer buying (as most do), where they hope to buy and in what price bracket, and what factors aside from price are important to them. I hope to be digging into specific cohorts (we know things like employment status, age, education, income) over coming weeks.
@Ronan, by “unscientific” I mean the following,
You expect a survey to take a random sample and to verify the sample members.
In the case of the Consumer Attitudes Survey, and I registered and completed the survey so speak from experience, it is limited to the sample of those who viewed the websites, saw the advertisement for the survey and decided to give responses. That’s not a random sample of the population.
Also multiple responses were possible from the same individual as there was no verification of the sample members.
Given the number involved of over 2,000 you would hope the effect of a small number of multiple responses to be eliminate, and given the places where the ads appeared, you would hope the sample was reasonably broad-based.
So the report is of interest, and I just picked it up minutes ago and I think it gives a guide. But for the reasons above, I don’t think it’s scientific in the statistical sampling sense.
I think Brian Lucey’s April 2010 prediction adds little to the debate :)
@NWL
Kelly and Lyons have been travellling well throughout.
Clucey showed well at the last fence.
McWilliams didn’t like the last fence at all but still in the saddle.
Blucey appears to have pulled up.
Others well back the field.
Except for Fitch.
What a horse or is it a donkey. Trailing badly until he changed jockeys in mid race and is now well up with the field. I wonder what the stewards will think.
http://www.businessinsider.com/belvedere-island-mansion-for-sale-45-million-photos-2012-2
It’s not even that nice, but here’s a 45 million dollar home in Marin. Great views, nice part of town. But 45 million?
It’s been noted on TPP (nod to coles2) that 35% of people thought that property in their area is good value, this tallied with the 35% of people who answered the poll being homeowners.
The fundamental flaw in the poll is the demographics, ie, the people who were polled.
It’s pretty much like going into a pub and questioning drinkers on the beer and service that they have received.
I have found that the drunker you are (i.e the willingness of the staff to continue serving you after you are a few sheets to the wind) the better everything seems.
Your sample was not “random”. It is specifically aimed at people using either DAFT or an affiliate – this means that they are looking to sell, buy or rent. They have an interest in property and their views are tied to their situation.
By the way, as a multiple daily user of DAFT I was polled, my views reflected that I rent, have problems securing credit (mortgage), but still felt that given the rising costs of home ownership and the fear of rising costs of mortgages that renting was the only option.
I also think that when the Rent V Buy argukment is being assessed that the interest payments on a mortgage, particularly in the first couple of years should be highlighted more than they are.
Well, this really puts NAMA between a rock and a hard place.
The recent reshuffle in NAMA left the Ulster banker (with a B!) in charge of a staff of 100 in the collection (aka “recoveries”) department, while John Mulcahy was shifted sideways to “asset management” with a small team of 10. In a way this shows where NAMA’s misguided focus lies. But the shuffle also shows the depth of NAMA’s confused thinking.
With prices falling and NAMA’s declaration not to sell assets below their 2009 acquisition price they have no option but to hold and manage the assets. With a staff of ten?
To be entirely fair the stated sales position has moved on a little (not a lot) and currently is ‘Well, we’ll take 2009 prices, less the fall in the CPI of say 5% since then…” With a fall in residential prices of 4% in one month alone, except for the really low hanging fruit, we’ll be waiting a long time for an Irish sales programme from NAMA.
Just more stagnation.