This morning has seen the publication of the Central Statistics Office (CSO) residential property price indices for Ireland for March 2013. 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 (March 2012)
- the start of this year (end December 2012)
- last month (February 2013)
- this month (March 2013)
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: Even though the launch of the property price register at the end of September 2012, was six months ago, we still don’t have a monthly index covering all reported transactions. DAFT.ie has begun the work to produce hedonic indices based on all the transactions made available by the Property Services Regulatory Authority, transactions dating back to January 2010. Daft.ie now produces every three months an index based upon the Property Price Register, and as that Register gets more data, you can expect the Daft.ie to overtake the CSO’s own index.
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, in Dublin in April 2007 at €431,016 and outside Dublin 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, €154,232 (last month €156,855, peak €313,998)
In Dublin, €188,429 (last month €189,396, peak €431,016)
Outside Dublin, €137,531 (last month €141,415, 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? Apartments fell by 7% nationally and in Dublin, and that might reflect low volumes, but all categories in all areas declines. The March 2013 decline of 0.5% is less than the 1.5% decline in February 2013.
Are prices still falling?After four months of consecutive declines, you would tend to say “yes” prices are still declining. And the decline in Dublin of 0.8% was greater than the 0.3% outside Dublin.
How far off the peak are we? Nationally 50.9% (52.0% in real terms as we have had inflation of just 2.4% between February 2007 and March 2013). Interestingly, as revealed here, Northern Ireland is some 56.3% from peak in nominal terms and 63.2% 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 – note January 2013 Fitch and S&P being inserted shortly].
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 in Ireland are now down 31.7% from November, 2009. The latest results from the CSO bring the index to 775 (29.0%) meaning that NAMA will need see a blended average increase of 29.0% in its various property markets to break even at a gross profit level.
The CSO index is a monthly residential property price index calculated from mortgage-based transactions. The main other index is that produced by Daft.ie based on the Property Price Register. There are four other residential price surveys, based on advertised asking prices or agent valuations (see below, details here). In addition Phil Hogan’s Department of the Environment, Community and Local Government produces an index based on mortgage transactions, six months after the period end to which the transactions relate, and which is not hedonically analysed – it is next to useless, and as some might say is a reflection of Minister Hogan, the Department will continue to produce these indices at a “marginal cost”.