Largest decline in residential property prices for a year – February 2013 CSO indices published

This morning has seen the publication of the Central Statistics Office (CSO) residential property price indices for Ireland for February 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 (January 2012)
• the start of this year (end December 2012)
• last month (January 2013)
• this month (February 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, €156,855 (last month €158,323, peak €313,998)

In Dublin, €189,396 (last month €190,998, peak €431,016)

Outside Dublin, €141,415 (last month €142,092, 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 experienced their biggest monthly decline since February 2012. However apartments both nationally and in Dublin bucked the trend with 7.1% and 5.8% increases respectively. It seems the withdrawal of tax relief on mortgages for first time buyers at the end of December 2012 has reduced demand and prices, and although it will still take some months to form a meaningful assessment, the indications are that the withdrawal has generally led to price declines.

 Are prices still falling?After three months of consecutive declines with the declines nationally increasing, you would tend to say “yes” prices are still declining. However the decline in Dublin was 1% and this masked an increase in apartment prices of 5.8% offset by a decline in house prices of 1%.

How far off the peak are we? Nationally 50.7.9% (51.6% in real terms as we have had inflation of just 1.9% between February 2007 and February 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 31.4% from November, 2009.  The latest results from the CSO bring the index to 778 (28.5%) meaning that NAMA will need see a blended average increase of 28.5% 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”.

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3,250 of NAMA’s Irish homes are lying empty

Nearly a year ago, there was criticism on here that NAMA still didn’t have a proper handle on its Irish residential property – NAMA would merely say that 9,200 homes were rented but there were 4,000 other homes whose status was not clear. This week in the Dail, we got an update and it seems that right now, some 3,250 of NAMA’s Irish homes are vacant.

NAMA says that it is currently renting out 10,000 homes at an annual rent of more than €100m – that’s an average of €10,000 each per year or €833 per month.

However NAMA says that 4,000 properties have been made available for social housing, but of these 750 have been sold or rented. So that leaves 3,250 homes that are presently vacant. We don’t know exactly where these properties are located but NAMA has said in the past that most of its residential property is located close to major urban centres where there is a strong rental demand. That means that 3,250 properties which might be capable of generating €32.5m in rent per annum, if the properties are similar to the 10,000 already rented, are currently lying empty.

That’s a pretty awful indictment of NAMA’s asset management capability.

NAMA says that it also has 400 properties for sale with its 80:20 deferred payment initiative, or “negative equity mortgage”.

The information was revealed in a response to a question from the Sinn Fein finance spokesperson Pearse Doherty to the Minister for Finance, Michael Noonan, set out here.

Deputy Pearse Doherty: asked the Minister for Finance further to Parliamentary Question No. 207 of 22 May 2012, if he will provide a breakdown of the stock of Irish residential housing in the National Asset Management Agency portfolio, showing the number of units rented and vacant, and showing the number of units being offered for sale and for rent.

Minister for Finance, Michael Noonan: I am advised by NAMA that it is continuing to carry out extensive analysis of data on residential property under the control of its debtors and receivers and expects to be in a position to publish the findings from this analysis in its 2012 Annual Report. At this stage in its analysis, NAMA advises that some 10,000 properties securing its loans are currently rented and are generating an annual rental income in excess of €100 million; a further 4,000 vacant houses and apartments have been made available through the Department of the Environment, Community and Local Government for social housing; and a further 400 properties have been made available for sale under the Agency’s 80/20 Deferred Payment Initiative, which the Agency plans to extend up to a maximum of 750 properties.

NAMA advises that to date sales have been agreed on 120 of the properties included under the 80/20 Initiative. NAMA also advises that in the time required by local authorities to assess and confirm demand for properties identified as being available for social housing, over 750 have been sold or privately let by their owners or, on their behalf, by duly appointed receivers. NAMA advises that the strategy for any given residential property depends on the detail of the asset disposal and asset management plans that have been agreed with individual debtors and receivers and that these plans are subject to on-going review. NAMA advises that the NAMA Board’s policy is that all assets are ultimately intended for sale. NAMA advises that it is not in the business of encouraging its debtors to stockpile assets but that actual sales depend on the level of demand in particular markets segments and on the availability of finance. NAMA further advises that it must also seek to ensure that its debtors do not offer for sale a volume of assets in excess of the current absorption capacity of the market.

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NAMA sells historic railway station

[30 second version – it has been announced this morning that NAMA has sold the Cultra Railway Station nearly Holywood in county Down which had been previously purchased for development by MAR properties. The new owner is County Down businessman David Crowe who plans to renovate the dilapidated 100 year old building into two houses and there may be further development on the site in time. The purchase price wasn’t disclosed]

BTW Shiells seems to be doing brisk business in Northern Ireland on behalf of NAMA, and this morning it has been announced that a dilapidated former railway station in the village of Cultra near Holywood in county Down has been sold by NAMA to a local businessman, David Crowe. The purchase price has not been disclosed, though BTW Shiells had advertised the property for “offers around GBP 450,000” (€552,000).

It’s a building, described by some as an “eyesore”, that has been derelict for 40 years that sits on 0.75 acres and has planning permission for conversion to apartments. The new owner however intends renovating the existing structure which will provide two houses, and there may be further development on the site over time. The asking price was no doubt influenced by the attractions in the local area – Ulster’s Folk and Transport Museum 5 star hotel Culloden Estate and Spa.

The property was formerly owned by NAMAed Northern Ireland developer, the MAR group, founded in 1997 by Noel Murphy (“M”), Adam Armstrong (“A”) and William Rush (“R”). The group developed residential and commercial property in Northern Ireland, Scotland and England. NAMA has acquired GBP 3bn (€3.5bn) of loans from Northern Ireland by reference to original par values and paid GBP 1.26bn (€1.5bn), and to date, it has advanced €125m to Northern Irish developers for the development of projects, though some of this money has been spent in the mainland UK.

Statements accompanying this morning’s announcement included:

David Crowe said “despite the dilapidated state that this building has sadly been left to degenerate to, as a local resident I couldn’t sit by and watch it go to further rack and ruin.

Not only will we be working to improve the area, which we will be doing immediately, but for far too long this has been an eyesore for locals and tourists alike. This is the main rail stop for the Ulster Folk and Transport Museum and this opportunity will further enhance the tourist attractions that this corner of north Down is famous for.

I must take this opportunity to commend the local councillors for their sterling work to ensure that this historic gem was not allowed to go the same way as so much of ourbuilt heritage.

I am now looking forward to sensitively restoring Cultra Railway Station in the months ahead.”

David Menary, Director of BTW Shiells said “the Cultra Station house has been in a very poor state of repair as far back as many of the local residents can remember, so it is great news that the original building is being restored. The regeneration of this historic Cultra landmark to a unique residential development is certain to attract significant interest when it is available on the open market.”

Howard Hastings, Managing Director of the Hastings Hotel Group said “Cultra Railway Station, which is adjacent to the Culloden Estate and Spa, is a beautiful building. I am only too delighted with the news that it will be restored to its former glory.

Mr Crowe’s ideas are very much in keeping with the area and residents and tourists alike will be able to view this beautiful building in the manner that the original architect intended. ”

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Irish residential property prices still falling, but at lower rate

Both Daft.ie and rival property listings website. MyHome.ie have today published their asking price reports for the last three months of 2012. Sherry FitzGerald have yet to publish their Q4,2012 survey and we are likely to need wait another few days for Lisney’s. But for the time being we just have Daft.ie’s and MyHome’s, and because MyHome’s is exclusively based on asking prices, it won’t be examined here – furthermore MyHome deserves to be criticized for failing to make clear in its summary that it is examining asking prices only even though it refers to the launch of the Property Price Register and at time of writing this morning, the full report link on the MyHome website returns a “404 – File not Found Error”.

On the other hand, Daft.ie’s quarterly report for the first time, examines actual sold prices based on data from the Property Price Register which was launched on 30th September 2012. You can look at both reports yourself to see what they say about asking prices, this blogpost focuses on actual selling prices information provided by Daft.ie. It should also be said that Daft.ie was the first company in October 2012 to examine actual selling prices by region when the PPR was first launched.

The information given by Daft.ie on PPR data is limited and we just get one measly statistic for the quarterly change in Q4,2012 and that is that there was a 0.9% decline nationally. All other statistics are annual, and since Minister Shatter has ruled out extending the PPR to pre-2010 data, we can’t get a peak to current decline. Daft.ie is to be thanked and congratulated for its PPR analysis, but it will shortly find itself with competitors if it doesn’t improve its analysis in this area – for example, would it really have been so difficult to say what the quarterly changes were for Dublin and South County Dublin?

To arrive at an national decline from peak to current, I have taken the CSO’s monthly residential property price index which is based on mortgage transactions only from nine banks, representing the vast majority of Irish lenders, and shows a decline from peak in September 2007 of 130.5 to December 2009 of 92.4 and DAFT says that their index for January 2010 is 150.4 and is 103.4 in December 2012. So marrying the two, we get a decline of 51.3% which is similar to the 49.3% recorded by the CSO for the peak to end November 2012.

As regards demand and supply which is one of the “hard” factors in determining prices – actual building costs, rental yields and affordability would be other “hard” factors which are sometimes overshadowed by “soft” factors like perception of future price movement. The Daft.ie report, authored by economist and now (part-time!) lecturer, Ronan Lyons, says “Nonetheless, all the indications are that a balance has been reached in Dublin – and possibly in the other cities – between supply and demand. With the pull of the cities stronger in the crash, the Government needs to start planning now for building the new homes the cities will need over the coming decade. This may sound odd, as property oversupply still blights much of the country, but the mistakes of the past should not mean avoiding making more mistakes in the future”

The methodology used by Daft.ie to determine price changes based on the PPR is described as follows: “The Daft.ie Price Register Index is based on prices for residential  properties recorded on propertypriceregister.ie, for which matches were found in the daft.ie archives. Because these are entered with a lag by solicitors, figures for previous quarters are subject to revision. Figures are calculated from econometric regressions, which calculate changes in price that are independent of changes in observable measures of quality, such as location, type, or size.”

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Irish Property in 2013 – the predictions

To quote from last year’s predictions blogpost on here

“There are three caveats that should accompany any forecast of property prices (1) none of us has a crystal ball and there are so many variables in how property prices change that, at best, you are getting an informed opinion and (2) when forecasting a “market”, you are not forecasting individual transactions, and property is not like milk – there will obviously be regional differences but even on the same street there will be individual properties and buyers and sellers, landlords and tenants, so a general price change might not affect a particular property and (3) to quote Upton Sinclair “it is difficult to get a man to understand something, when his salary depends upon his not understanding it” or to put it another way, you should always bear in mind the motivations of those providing forecasts, and given this is an anonymously-authored blog, that makes assessment difficult.”

Welcome to the 2013 predictions where you can cross palms with cyber silver and the tea leaves are scryed to help tell you what the year ahead will mean for property selling prices in Ireland, residential and commercial and for rents, also residential and commercial. You may care to take a look at the predictions here last year before taking any of this too seriously.

Firstly here is the summary of the predictions

And here are the seven areas taken into consideration

The general economy. Unemployment will remain elevated at 14% despite continuing emigration. The domestic economy will bounce along the bottom with the first half of the year stumbling as the effects of Budget 2013 sink in. The overall economy is difficult to predict, Europe including the UK and the US continue to teeter between the Rapture and the Abyss. Retail has had a good quarter four in 2012 by all accounts, both actual retail indices from the CSO and anecdote for December. Exports have not suffered the expected decline in quarter four seemingly, and both services and manufacturing are growing. Construction is still in the doldrums but credit appears to no longer be contracting.

Property taxes. For once the Government has stuck to a commitment and the mortgage relief for first time buyers has in fact been discontinued from the end of 2012. The new property tax kicks in from July 2013 but in 2013, there will be a 50% discount on the annual charge which will be €315 in a full year for a typical home. We will start to hear more about water charges which may kick in as early as 2014, and these are unlikely to be less than €200 per annum on average to make the cost of installation of meters and administration feasible on a cost basis.  Stamp duty may be increased if transactions start flowing again, and remember the Government has to produce a Budget in December 2013 which will adjust the economy by a further €3.1bn in 2014.

Transparency. We already have the Property Price Register which is prone to errors and only extends back to the start of 2010, but it does provide a basis for comparing values. We are set to have the new commercial leases register by the end of March 2013 so there should be far greater transparency on rental levels, but for the time being at least, there won’t be a commercial property price register and of course there are no plans to make available actual residential rents which are already captured by the Private Residential Tenancies Board.

NAMA. Contrary to popular belief, NAMA actually has little control over the residential market with about 12,000 homes remaining under its control with its borrowers and most of these are rented in rentable areas where rental prices are stable and modestly rising. However NAMA is about to unleash a lot of commercial property onto the market, and there will be €2bn-odd of staple finance to sweeten the deal, particularly on better quality properties with good tenants and where investors have a track record. NAMA has given €6m of rent reductions to commercial tenants in 2013 and the same is expected in 2014 as the domestic economy remains shaky. There will also be more evidence of NAMA investing in developments, so the perception there is an ever dwindling supply of property, particularly prime central Dublin office property, may diminish.

The banks. Deleveraging will continue apace and there is still a mountain of loans and property that non-NAMA banks in particular want to offload. Banks are lousy managers of property so there will continue to be an ample supply of property coming onto the market, courtesy of banks. On the other side of the transaction, there has been some recent stabilization in the provision of credit both to households and businesses and this should improve the general background music.

Bankruptcy laws and repossessions. We expect the new Personal Insolvency Bill to be given presidential assent any day now and it should be immediately commenced. Justice minister Alan Shatter has predicted that there will be 3,000 bankruptcies in Ireland in 2013, up from 30 in a typical year.  Banks are expected to enforce buy to let loans and the 600 repossessions per annum in Ireland may rocket, the prediction on here is that there will be 5,000 repossessions in 2013 and that is a considerable stock of what will be depressed property to be offloaded on the market.

Allsop Space. Another four or five Allsop Space auctions are expected in 2013 and there may be mega 200-Lot events. The successful venture between British auctioning giant Allsop and Dublin property company Space seems to have taken a new direction recently with a focus on commercial property. These auction events will provide finger-tip assessments of the market overall. There will be increased efforts to get more private vendors to sell their property at auction, and who knows, maybe NAMA will embrace the transparency of the auction especially after the Enda Farrell affair in 2012 and the constant prodding from Senator Mark Daly to make the selling process clearer.

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Irish Property in 2012 Review

As 2012 draws to a close, this is a review of 2012 Irish property pricing, both residential and commercial, selling prices and rents. There will be a separate blogpost with some gazing into the crystal ball to the year ahead.

First up, this is a summary of the predictions on here a year ago, mid-year and the final outturn. Remember, the annual figures examine the latest property indices, for residential these are Nov 2011-Nov 2012 but commercial indices are published quarterly so these are Sep 2011-Sep 2012, this isn’t cheating, this is basis of the predictions clearly set out in the two previous blogposts.

Residential selling prices

Well, well, well, the 1.1% national rise in residential property prices in November 2011 was unexpected on here, and the publication of the last CSO index for 2012 last Friday has certainly given a fillip to the market. The Independent has declared that “the world’s joint worst ever property crash has finally ended” – the share price for IN&M, the group that publishes the Indo and Sindo closed at 2.9c on Friday valuing the entire group at €15m after a loss of €177m for H1,2012 and a massive debt that needs be resolved in the next quarter, so the Indo probably knows as much about the property business as it does about the media business, but it is still surely just a happy coincidence that rising property prices might give a desperately-needed shot in the arm of property advertising.

But stepping back, and examining the CSO’s index for the past 12 months does seem to indicate a change in the residential property market with prices increasing in four of the past five months, and prices overall down just 5.7% in the past 12 months. Yes, estate agents will tell you there was a stampede by first time buyers to complete by the end of 2012 to qualify for valuable tax reliefs which come to an end on Tuesday next, and the property tax relief in 2013-2016 is paltry by comparison, no-one is going to stampede over saving €157 in 2013 on a €150-200,000 home. There was certainly a major boost to first time buyer lending as revealed in mortgage statistics .

The Property Price Register which was launched on 30^th September 2012 and you would rationally have thought in a buyers’ market, the Register would force prices to decline to the lowest comparable level or even below. Having said that however, if the Register was only available from the start of October 2012, then there is likely to be a time-lag in the work-out of the effect of the Register.

Allsop Space had another terrific year and clearly leads the Irish property auction field by a country mile and until the Register was introduced, these mega auctions were practically the main way of seeing what the national cash market for mostly distressed property looked like.

NAMA has had little effect on the residential market in 2012 despite all the fears beforehand. The Agency has overseen the disposal of about 1,000 of its 13,000 Irish homes and seems generally satisfied that the homes are located in rentable locations and doesn’t seem to be in any rush to sell. The 80:20 deferred mortgage initiative which now applies to 295 homes has apparently been a success but that seems to be more a function of marketing and profile than the mortgage product itself with few buyers apparently taking the new mortgage product.

Interest rates have not been much of a factor in the housing market this year with the ECB maintaining rates at record low of 0.75% with little imminent prospect of major change. Banks however have been lifting variable rates and that shouldn’t be a surprise as they rebuild their once devastated balance sheets – before our generous recapitalization, that is.

Vacancy levels in Ireland remain at about 14% which is about twice international standards and twice the actual level of vacancy in Northern Ireland, but there is wide variation in vacancy levels and indeed in some parts of the country, we may be at levels which would normally prompt new construction.

Residential rents

As with property, residential rents have had a year of two halves, with the first half experiencing mild declines but the second showing signs of robust growth. In January 2012, Joan Burton’s Department of Social Protection slashed rent assistance levels by a simple average of 13% but some rates were really slashed by 29%. This seemed to have an effect in the first half of the year with the CSO reporting monthly declines of up to 0.9% but then from the second half of the year, there has been growth every month with November 2012 rents up 0.6% on a month-on-month basis.

In Ireland, the rent versus value of a home and yields went out the window during the boom years. Who cares about achieving a 7% annual yield when the underlying property is appreciating by a stonking 10-20%. So it is no surprise that in the property collapse that rents have had less of a decline than selling prices. In fact the big correction in rent took place in 2009 with a 19% maximum decline, compared to a decline of just 1.4% for all of 2010. Since the start of 2011 there has been a 6.1% increase (mostly recorded in February and October 2011 and February and September/October/November  2012).

The results of the Census 2011 showed that there has been a massive increase in renters, with privately renting households increasing by 120% from 145,317 in 2006 to 320,319 in 2011. The ESRI recently opined that this build-up in renters will eventually unwind, though the ESRI failed to consider the growth in the trend of renters. However for the time being, it certainly means that the demand for rented accommodation is elevated, particularly in the better urban and suburban locations.

Commercial selling prices

Estate agents or at least the select few selling major commercial property are a happier bunch at the moment, with 2012 seeing up to €750m of investment transactions, compared to a low of less than €200m in 2011 though we are still off the €3bn record in 2006. There is limited liquidity and buyers in the market, but yields are still all over the place and there have been transactions at close to 15% yields this year.

But 2012 should have been a bumper year and many thought prices would recover. Not so on here where it was predicted there would be a 0-5% decline and in the event, prices have declined 5.2%. Despite the give-away Budget announced in December 2011, where stamp duty was reduced from 6% to 2%, where reform of Upward Only Rent Reviews was abandoned, where capital gains incentives were put in place, despite all this, prices still fell 5.2%. If you assume the long term “normal” vacancy level for commercial property is 5% – and that is disputed in some quarters where it is suggested it should be closer to 15% – then current vacancy levels remain an extreme drag on prices.

But 2012 has seen a rebound in transactions in all sectors, particularly offices and hotels, though it seems on here that industrial continues to lag behind.

Commercial rents

Reflecting the shaky domestic economy and the overhang of vacant property, commercial rents generally continued to decline but at a lower rate than previously. Landlords have some degree of certainty that the Government will not tinker with Upward Only Rent Review clauses, so there is no incentive to negotiate with tenants unless the landlord believes the tenant’s business is jeopardized and that there will be voids in the event of any collapse in the tenant’s business.  NAMA has said that it has approved €6m of rent reductions in 2013 but remember that these rent reductions, or “abatements” , are temporary and provided on a year-to-year basis and as the economy improves, NAMA will be less likely to give its approval.

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240 of us are emigrating every day according to latest population estimate

“No longer shall our children, like our cattle, be brought up for export” then-President of the Executive Council, Eamon de Valera in the Dail in 1934

It is a bittersweet coincidence that today, the Central Statistics Office (CSO) publishes two reports – one is the population estimate for the State at April 2012 which claims that 87,100 people emigrated in the year to April, and the other is the livestock slaughterings report for August 2012. It seems that once again, our children are in fact being raised like livestock for export. The population of the State in April 2012 is estimated to have been 4,585,400 an increase of 10,500 over the previous year. The 10,500 increase comprises births of 74,000, deaths of 29,200, emigration of 87,100 and immigration of 52,700. Emigration is estimated to have increased from 80,600 the previous year and is now at the highest absolute level since at least 1987 and just below the rate per 1,000 population that emigrated in 1989. Last year’s emigration estimate means that an average of 240 people emigrated for each of the 365 days.

The low annual increase will have an impact on residential property demand. If we simply take the 10,500 increase and apply the average of 2.7 persons per household, we need 4,000 homes for the increased population. Of course our households are also fragmenting at a rate which suggests we need 17,000 new homes each year just to accommodate smaller household sizes. And there is also obsolescence of existing property which isn’t really measured in Ireland. Back in 2010, the National Institute for Regional and Spatial Analysis figured we had an overhang of vacant property of over 100,000 units, so nationally we continue to have an overhang.

Ireland is unique on the planet for seeing its population today below the level in the 1840s. Yes we had a famine which saw 2.5m die or emigrate, yes we were under permanent occupation by our hostile neighbour which partly resulted in the Industrial Revolution bypassing the country, but even after liberation in the 1920s it was still 50 years before the decline in population really started to reverse. We may have missed the Industrial Revolution, but with the aid of foreign direct investment, we leapfrogged to the Information Age. We have a peaceful country with no military enemies, untouched by natural disasters with an abundance of natural resources to sustain ourselves, yet we have again returned to mass emigration on a scale seen in the 1950s and 1980s.

This is a man-made disaster.

[The table at the top of this blogpost extracts information in today’s CSO publication and calculates annual population, birth, death and emigration rates per 1,000. The second table was produced on here and originally published in August 2011]

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NAMA is clueless about plans to build more homes and commercial premises

Ask any competent developer what property he expects to bring on-stream in the next couple of years, and you will be probably get a reasonably clear and detailed response. Of course these days in Ireland, developers have very limited access to funding and there are still serious economic uncertainties plus there is an oversupply in many sectors.

However if you were to ask NAMA the same question, you would expect robust estimates. After all, NAMA is sitting on a mountain of cash and even after paying back 25% of its bonds by the end of next year, it should still have a mountain of cash until 2017 when it needs repay the majority of its bonds. Not only is finance NOT a problem at NAMA, but NAMA assures us that it has “reviewed” 97%-plus of developers’ business plans. Plus NAMA has specifically committed to investing €2bn in Irish property development in the next four years. So you would expect NAMA to know what property it was bringing on-stream in the next couple of years.

But you’d be wrong to expect such information.

In the Dail on Tuesday this week, the Sinn Fein finance spokesperson Pearse Doherty asked Minister for Finance Michael Noonan for NAMA’s construction plans in 2012, 2013 and 2014. Given that we are constructing so few homes (see graph above from the September economic bulletin from the Department of Finance), NAMA has the potential to be a major builder or at least a major financier, and given that it has “reviewed” nearly all developers’ business plans and remember it acquired the first loans 2.5 years ago, you would expect it to at least be able to estimate what building was going to take place under its auspices. We know that NAMA is funding the completion of homes on the former Dun Laoghaire golf course, the Charlestown shopping centre and the building of a major new office block in Dublin North Docklands. But is NAMA going to be behind the building of 50,500 or 5000 homes in the next three years and how many million sq feet of commercial premises is it planning. Clueless.

Deputy Pearse Doherty: To ask the Minister for Finance the number of residential units in the State which the National Asset Management Agency plans, either itself or via its receivers or its debtors, to construct on or on which to complete construction in 2012, 2013 and 2014.

Deputy Pearse Doherty: To ask the Minister for Finance the square footage of commercial units in the State which the National Asset Management Agency plans, either itself or via its receivers or its debtors, to construct or on which to complete construction in 2012, 2013 and 2014.

Minister for Finance, Michael Noonan: I propose to answer questions 296 and 297 together.

I am informed by NAMA that it has no current plans to become directly involved in commercial and residential construction projects but that it will continue to support debtors or receivers with loan finance for viable projects. In that context, it has announced plans to provide loan finance of up to €2 billion over the next four years in commercial and residential assets located in the State, subject to identifying commercially viable projects from among those controlled by its debtors and receivers. NAMA may, where appropriate, enter into joint venture arrangements on certain projects. To date, NAMA has approved advances in Ireland of over €610 million to complete projects in residential, commercial, retail, leisure, and healthcare sectors and almost €400 million of this has been drawn down.

At this stage, NAMA is engaged with its debtors and receivers in the process of identifying projects which may be commercially suitable for development with a view to meeting prospective market requirements over a medium-term horizon and, in the light of this evaluation, its Board will determine its project financing plans.  NAMA is also reviewing existing planning permissions and, where appropriate, will engage with planning authorities, through its debtors/receivers or directly, in cases where modifications may be required to render projects commercially feasible.

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Northern Ireland property crash probably worst in the world

Northern Ireland’s real decline from peak is 59.5%

It’s not really the Carlsbergesque slogan that Northern Ireland would welcome, but a new official series of statistics released today by Sammy Wilson’s Department of Finance and Personnel shows that residential property prices in Northern Ireland are down 53% from the peak in 2007 and fell by 3% alone in the second quarter of 2012. These are the nominal headline figures, and on this side of the Border in the Republic, the equivalent figures are 50% and 2%.

However, when you factor in inflation for the UK (including Northern Ireland) of 16.1% from the peak in Jul-Sept 2007, and compare that with inflation of just 1.7% since the peak of Sept 2007 in the Republic, the real decline in Northern Ireland is indicated to be 59.5% compared with 51.1% in the Republic. Which is surprising enough, but compare this with the world’s worst property crashes – as measured by real declines in value from peak – and it seems that Northern Ireland is the record holder, the Usain Bolt, the gold-medal Olympian of property crashes!

The figures published today are worse than the quarterly survey figures produced by the University of Ulster in association with Bank of Ireland, even though we still haven’t seen the Q2, 2012 results from the University. The probable reason for the discrepancy is that Sammy Wilson’s figures today are based on ALL sales recorded by UK tax authorities including auctions where you are likely to find repossessed/foreclosed property which might be sold under distressed conditions. The University survey is based on estate agent sales which would tend not to be distressed. Also Sammy Wilson’s results examine all sales totalling about 3,000 per quarter, whereas the University only looks at about 1,000 per quarter.

Elsewhere the results published today show that there were 2,962 “verified” residential property transactions in quarter two, but this is in line with the circa 3,000 recorded in the last four quarters. In other words, prices are falling and transaction levels are staying the same.

On this side of the Border we seem to have two factions of commentators, the “Bottomists” saying that prices are at the bottom or at least stabilising in some areas and the “anti-Bottomists” saying that prices are still falling. But when you consider the fact that Northern Ireland has a residential property vacancy level of less than half ours (14.7% versus 6.4%), they have their own bank, the Bank of England which didn’t allow credit to balloon in the same way as the ECB did in the Republic, their net migration in 2011 was nil whilst ours was 34,100 of net emigration, and their unemployment rate is 7.6% versus our own 14.8% though their local economy doesn’t seem to be growing any more than our own, you might conclude that the anti-Bottomists will see their position boosted by today’s publication.

Also, there is issue here on public administration. Sammy Wilson’s Department of Finance and Personnel is hardly of the same scale as Minister for Finance, Michael Noonan’s Department of Finance. Yet, it has been able to produce a statistically-sound  house price index based on all transactions, cash and mortgage. We might, if we are lucky, get from our CSO next week an indication of the total market – cash and mortgage – or we may not, but the July 2012 index produced will be based on mortgage transactions only.  We might, if we are lucky, get from the Property Registration Authority of Ireland a house price database in September 2012, but I wouldn’t hold my breath given the delays to date. Time for Minister Noonan to raise his game.

[The detailed statistics published today are available here. There is a paper on the methodology used in compiling the statistics available here.]

UPDATE: 4th September, 2012. The Bank of Ireland/University of Ulster house price survey for Q2, 2012 has been released this morning. It shows that the price of an average home in Northern Ireland increased by 3.8% in Q2, 2012 from GBP 134,560 (€169,963) to GBP 139,633 (€176,370 ) which means that according to this survey, Northern Ireland residential property is 44.2% off peak of GBP 250,400 in Q3,2007. The survey was based on 931 estate agency reported transactions. Bank of Ireland thinks that residential property has another 5-10% to fall in Northern Ireland. Following the introduction of the new Northern Ireland property price series a fortnight ago by Sammy Wilson’s Department of Finance and Personnel, there will be less attention paid on here to this survey, because Sammy’s series has all sales recorded at HM Revenue and Customs and totals about 3,000 transactions per quarter. It is worth noting that Sammy’s series for Q2,2012 showed prices dropping 3% in the quarter and are now 53% off peak. However this morning’s survey reveals the following for regions of Northern Ireland and property type, prices in pounds sterling.

 

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Northern Ireland home repossession rate is 10 times worse than in the Republic

It will be Friday this week when our own Financial Regulator, Matthew Elderfield publishes the mortgage arrears data for the second quarter of 2012. Sadly on this occasion, the data will again be confined to owner occupier mortgages, but it is hoped that in November 2012, we will start to get data on Buy-to-Let mortgages as well. This is what the historical data looks like:

As usual, the Financial Regulator will provide home repossession data on Friday as well, but it is unlikely that there will be much change to the miniscule number of repossessions that take place in (the Republic of) Ireland. Since 2009, there have been about 500-600 repossessions per year, and there has been little absolute change in the last three years, to quarterly statistics despite the intensifying crisis of unemployment, reductions in take-home pay and collapsing property values.

Contrast this with our neighbours over the Border who on Friday last published repossession data from its courts system for Q2,2012. The figures show that between April and June 2012, there were 713 repossession orders granted by the Northern Ireland courts, of which 205 were suspended and 6 were “suspended possession combined”

Northern Ireland is a jurisdiction with a 7.6% unemployment rate compared with 14.8% on this side of the Border. Their residential property has declined by about 50% since the peak in 2007, about the same collapse as our own, though with higher inflation across the UK than in Ireland, the real collapse in Northern Ireland has been slightly worse than our own. And remember in Northern Ireland, they don’t have a problem with vacant housing that we do here (see bottom of table below).

So on a pro-rata house basis – and taking account of immediate possession orders only – the repossession rate in Northern Ireland is 8 times greater than in the Republic. Taking account of all repossession orders, actual and suspended, the repossession rate is 11 times that of the Republic.  These comparative  results are based on total number of dwellings in both jurisdictions – we don’t have mortgage statistics for Northern Ireland, in the Republic there are about 764,000 mortgages.

An unpleasant but inevitable consequence of adopting a UK model for personal insolvency would be an increase in repossessions, and in this country we have a troubled history with eviction and dispossession under occupation. But as a society and economy, we need to ask ourselves if it is better to leave people in property which they cannot afford but under austere conditions which blight their lives and their contribution to the economy or to release them to get on with their lives in a humane way but which may mean the repossession of their home. Supporters of a UK-style insolvency/bankruptcy model will need confront these unpleasant consequences.

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