Comments on: Deflation and Housing Costs

By: Ronan L

Ronan L — Mon, 15 Jun 2009 07:45:43 +0000

Sorry Pat, but there’s no evidence that there was any disproportional floods from the public to private sectors, even at the height of the boom and pre-benchmarking. At best, it was a trickle:
http://www.scribd.com/doc/11635058/Wage-Determination-in-the-Irish-Economy-Ruane-Lyons-QEC-2002

By: Pat Donnelly

Pat Donnelly — Mon, 15 Jun 2009 05:55:37 +0000

Who audits these statistics?

Given their use for pay, pensions and the large role of the government in the economy, the conflict of interest is notable but never stressed!

This was one reason the civil service was offered benchmarking: they were walking off to better paid jobs in the private sector.

By: Ronan L

Ronan L — Sat, 13 Jun 2009 14:19:16 +0000

Rents in Dublin are falling faster than elsewhere, so Karl’s point on correcting the weights across rental and general samples is a good one - the overall effect, though, would not be that large, and might only knock a couple of points of the 16% fall.

On a self-interested side-note, interesting to see the CSO’s rental index come more and more into line with the daft.ie rental index! (Last year, it had lagged by up to three months.)

By: Real interest rates, Ireland's property market, falling house prices | Ronan Lyons

Sat, 13 Jun 2009 14:09:53 +0000

[...] Sometimes, it’s easy to forget - when you see interest rates of just 2% or so on your savings that the real return on savings can be quite high. Even with zero interest rates - as people often have in their current accounts, it may actually be the case that there’s “never been a better time to save”! Earlier this week the latest CPI figures were released, showing an annual fall in prices of almost 5%, as discussed by Karl Whelan on the Irish Economy blog. [...]

By: Deflation Rising - Politics.ie

Deflation Rising - Politics.ie — Fri, 12 Jun 2009 11:59:49 +0000

[...] Originally Posted by kerrynorth They do. Its called the HICP. Its a European harmonised index of consumer price inflation. It was -1.7% for the 12 moths to April. karl Whelan has a post on how best to handle mortgages in the CPI The Irish Economy Blog Archive Deflation and Housing Costs [...]

By: Brendan Walsh

Brendan Walsh — Thu, 11 Jun 2009 22:25:43 +0000

“Those . . who don’t own their own home have not experienced a 4.7% decline in their cost of living” - but neither did they experience such high inflation when interest rates were rising. In the long run [when we are all dead] there is little divergence between inflation measured including and excluding house-financing costs.

By: Frank Galton

Frank Galton — Thu, 11 Jun 2009 22:20:05 +0000

One interesting thing about the CSO inflation numbers — outside of energy and housing, which is admittedly a big chunk of the picture, there are important sectors of the economy where prices are still increasing quite a bit. Education (+3.5), health (+4.5), and a load of “miscellaneous” services (+8.6). It may be deflation, but it’s not balanced deflation.

By: karl deeter

karl deeter — Thu, 11 Jun 2009 21:35:56 +0000

I’d tend to think that ‘equivalent rental comparison’ actually disguises inflation! it is that practice which meant that while house prices spiralled out of control in the US that there was never inflation (due to rising housing costs) reflecting the effects of that. Equally using mortgage interest in a low rate environment does the same if you base it from that.

CPI - needs to reflect actual costs, opting for equivalents is equally distortive. if rents are down 40% due to massive rental property over supply does that mean that people who bought two years ago benefit? Does it more accurately tell us about the economic environment we live in?

Really what this tells me is that we don’t actually understand our own property market, if the land registry can record mortgages on properties and the like then we could (if the information was used) have an actual idea of the true picture. the real missing link is the actual selling prices which are impossible to find out due to the ‘private treaty’ practice, but if revenue were to ensure the folks in dublin castle reported them - because solicitors have to report them in one form or another for stamp duty purposes - we could get them. cross this with the more available rental market interpretation and you might get a better picture.

the real trick is to get several agencies in Ireland working together, and frankly, that’s the real stumbling block.

By: Colm Harmon

Colm Harmon — Thu, 11 Jun 2009 19:03:28 +0000

I mentioned differential impact of inflation once before. As David Madden pointed out not such a big deal overall. But Karl’s point in last para is important. A similar point relates to fixed mortgage holders (anecdotally a lot of the last lot into the housing market, younger, riskier jobs so perhaps now jobless) - the falling interest rates and deflation lie behind a lot of the justification for budget policy (offsetting taxes) but fixed mortgage folks neither get neither compensatory effects.