This morning has seen the publication of the Central Statistics Office (CSO) residential property price indices for Ireland for May 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)
- 12 months ago (May 2011)
- the start of this year (end December 2011)
- last month (April 2012)
- this month (May 2012)
The CSO’s indices are Ireland’s premier indices for mortgage-based residential property transactions. The CSO analyses mortgage transactions at nine financial institutions : Ulster Bank, Allied Irish Banks, Bank of Ireland, ICS Building Society (part of the Bank of Ireland group), the Educational Building Society, Permanent TSB, Belgian-owned KBC, Danish-owned National Irish Bank and Irish Nationwide Building Society. The indices are 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 indices are averages of three-month rolling transactions.
Cash transactions: sadly the CSO is still unable to provide up-to-date information on the total market, including cash-transactions, because apparently, the Revenue Commissioners have failed to provide the information to the CSO. There is increasing concern that although the CSO captures most 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. In February 2012 , 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 earlier this year 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 them says that almost three quarters of its auction transactions were in cash. The CSO still hopes 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. NAMA, which is not an honest broker in this discourse, said recently “the index indicates a decrease of 48% overall but we believe the market has decreased by 57% or 58% on average. The index simply has to catch up because the transactions on the market reflect that.” NAMA in particular seems to believe that prices outsideDublin have fallen significantly further than the CSO index suggests. A recent enquiry to the Property Regulatory Services Authority which will administer the new House Price Database asked about the launch date and the response was that it would be implemented as soon as practicable – sources suggest that will be Q4,2012. The CSO continues to hope that it can introduce supplementary property price statistics over the summer which will show the overall size of the market including cash transactions, which will give a solid basis for assessing the cash/mortgage elements in the market.
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 prices as sound and comparable to prices captured by the CSO series, then these would be the average prices today:
Nationally, €157,601 (last month €157,360, peak €313,998)
In Dublin, €187,147 (last month €186,827, peak €431,016)
Outside Dublin, €143,356 (last month €143,148, 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? Prices nationally have risen for the first time since September 2007 – yes there have been a few flat months, but this is the first month since the boom that prices have actually increased, albeit by just 0.2% in one month. The increases were both in Dublin and outside Dublin but for houses only – apartments still fell both in Dublin and nationally during the month.
Are prices still falling? No, based on May’s results where prices nationally rose by 0.2% following a decline of 1.1% in April 2012, it was flat in March 2012 which followed a 2.2% decline in February 2012, 1.9% monthly decline in January 2012, 1.7% decline in December 2011, 1.5% decline in November 2011, 2.2% decline in October 2011, 1.5% decline in September 2011 and 1.6% decline in August 2011.
How far off the peak are we? Nationally 49.8% (52.3% in real terms as inflation has increased by 5.2% between February 2007 and May 2012). Interestingly, as revealed here,Northern Ireland is some 46.3% from peak in nominal terms and 54.0% 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. 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 30.2% from November, 2009. The latest results from the CSO bring the index to 816 (22.6%) meaning that NAMA will need see a blended average increase of 22.6% in its various property markets to break even at a gross profit level.
The CSO index is a monthly residential property price index. Irelanddoes not yet have a publicly available register of actual sale prices, but one is expected in late 2012 following the passing of legislation this – read the latest on the House Price Register here. There are four other residential price surveys, based on advertised asking prices or agent valuations (see below, details here) – Phil Hogan’s 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 
Bounce, Dead and Cat
150K doesn’t seem like a lot of money for an “average house” in a nation with Ireland’s GDP per head/salaries (even with her current unemployment rate), but what does 150K buy you in Ireland? what’s an average house? (an “average” house in Laos is a two room wooden shack with straw roof — and you don’t buy it, you either build one yourself, or move into one that was abandoned by someone else).
@Zizzy, they’re average *prices* not average *houses*
We don’t yet have a House Price Database and the latest is that we won’t have until the end of September 2012 at the earliest, thanks for to the folks at the Property Registration Authority, so you can’t yet browse actual selling prices, but the two main national sales portals with asking prices are
http://www.daft.ie
http://www.myhome.ie
Despite having joined the long line of eejits calling the bottom, I am sceptical that these figures will do anything more than flat-line.
Firstly and most importantly, the majority of the “increase” is accounted for by apartments, which are currently obeying different laws of physics than houses.
Secondly, as mentioned, there have been a lot of cash transactions recently from retirement lump sums, etc, which are having a temporary distortion in my opinion.
The situation at the banks remains utterly stagnant, so I so no translation of these figures into relief from negative equity or an increasing in bank lending. We’ll be staying at this level for a while I think.
@OMF, it is actually apartments that fell uniformly during the month. Houses rose in Dublin and nationally.
From recollection, some €600m of cash was paid out to early retirees this year, and indeed maybe some of that is making its way into property.
And I was surprised by a response given by Minister Noonan to Fianna Fail’s finance spokesperson Michael McGrath last week when he said
“I am advised by the Revenue Commissioners that there has been an increase in the number of property transactions reported to the eStamping system for Stamp Duty purposes – there were a total of 20,317 such transactions recorded in the first five months of 2012 compared to 18,207 in the same period in 2011. I understand that a breakdown between residential and non-residential transactions is not available. These figures may be subject to change – for example, if a transaction is cancelled.”
http://debates.oireachtas.ie/dail/2012/06/20/00064.asp
The above will include commercial, residential and land, and as the Minister says cancelled sales, but it is another little nugget implying some sort of stabilising, which may be temporary or a dead cat bounce though it may also presage true stabilisation. It will take a few months to tell.
As the report itself says; “care should still be taken when interpreting monthly figures which may indicate short-term volatility rather than underlying change in longer term price trends.”
Despite the comparatively large sample size, a 0.2% change is very small compared to the underlying uncertainties in the data and in the analysis method. Given the previous series of numbers it would be unwise to be too confident about a turnaround in prices for the moment.
The housing ponzi scheme merchants and their media supporters are still out there ready to push gullible people into the lifetime mortgages.
Anyone with even the remotest understanding of statistics would see this minuscule increase are well within the margin of error.
I’m sure if the numbers were run slightly differently we could have had – 0.2%.
I’m be highly suspicious if these numbers always come just on the positive side.
Are were ever going to see a slightly negative number?
We need to stop selling people on this housing fantasy. The Germans rent. It’s the smart way to provide housing. It’s flexible and meets the changing needs of homeowners over a lifetime at the minimum cost.
We need to start making and exporting widgets that people want rather than building houses for each other.
@paddy19
We need to stop selling people on this housing fantasy. The Germans rent. It’s the smart way to provide housing. It’s flexible and meets the changing needs of homeowners over a lifetime at the minimum cost.
We need to start making and exporting widgets that people want rather than building houses for each other.
I disagree. If I had paid €600 a month for 40 years – some 288k – a house purchased would have been long since paid off leaving disposable income which would get spent on other commodities. (All assuming no inflation)
Renting is unproductive for the renter and is simply transferring capital to the landlord. Further more there is little security of tenure and frankly I would not want to live under the shadow of eviction, and under the shadow of restrictions of what i can do with the property.
Then consider what happens at retirement. If you are still renting at €600 a month and have only the State pension you have a problem. If your home is paid for you don’t.
Renting is not a sensible option.
As far as widgets go absolutely, we need more widgets for export but the trouble is that nearly all Western countries have exported their widget creating capability to Asia in order that shareholders can glean an extra shekel.