Optionality, Market Efficiency, and Asset Price Disclosure

Sorry about the overly technical title to this little entry.  I want to ask a question rather than make an informed contribution to the discussion.  Here is the question: 

Why is the Irish government effectively withholding information about house prices from the public at large? 

As house sales prices began to fall in 2008, a relatively minor legal-technical glitch prevented estate agents and newspapers from publicly revealing the prices of completed sales.  The government could have easily fixed this legal glitch with new legislation, and also could have improved the system to allow full, complete disclosure of all house sales prices.  Rather than fix the legal glitch, the government has scrupulously maintained the new status quo, imposing an effective news blackout on house sales prices. 

My question: why and for whom? 

The absence of price information has probably slowed the house price correction, since it plays into the behavioural bias of potential sellers who psychologically tend to resist price falls (behavioural finance researchers refer to “framing” and the “disposition effect”).  The resulting disequilibrium in housing supply-demand has slowed completed sales to a crawl.  This, in turn, has done damage to a range of industries and occupations: home furnishings, real estate brokerage, the legal profession, and newspapers, among others.  These industries/occupations would have been hit by the recession in any case, but the lack of house pricing clarity made the situation worse for them.

As a basic principle of economics, price information release is almost always welfare-enhancing. There are some special conditions when this is not true, but as a general principal it seems pretty solid.  So not having house price information goes against the public interest.  It must be done for the benefit or one or more special interests, or for political purposes.

One big beneficiary is bankrupt or near-bankrupt property developers.  The lack of price clarity makes their true value more volatile and uncertain.  This allows them to play for time even if, using true but unobservable house/property prices, some or all of their businesses are currently bankrupt. 

Today’s papers note that banks are also see themselves as benefitting from house price obscurity.  Perhaps, if revelation of true property prices also would make them bankrupt, they can use the lack of price clarity to play for time.  But in the case of publicly-traded bank shares and debt securities won’t the investment community see through this obscurity and (if anything) over-correct for this obvious information blackout?  See, e.g., Douglas Diamond’s classic piece, The Optimal Release of Information by Firms.

Are there other beneficiaries or other reasons?  What is the true driver of this odd piece of (implicit) government policy, or should it be called non-policy?  The economic competence of the government could be queried, so perhaps it is simply bad decision-making on their part? I do not know the answer.

22 replies on “Optionality, Market Efficiency, and Asset Price Disclosure”

The State already has all the info it requires via the particulars delivered form which must be furnished to the Revenue for each house transaction:

There was no legal-glitch. Estate Agents are bound by confidentiality even if they used to ignore it. People have a constitutional right to privacy. That does not have to be lessened for this purpose as the state has the info it needs.

Note: It is pretty clear that the revenue commissioners have not been inputting these details into appropriate databases over the last number of years.

Which means if it wanted to the state could release the data in a general summary format by area. No one expects the actual detail house by house to be made available.

I belong to the school of thought that says tell it as it is. Then we know what we are dealing with and will make hopefully the right decisions.

The government belong to the school of thought that says spin spin spin or if you can’t spin it with hold the information and hope for the best. They will even resort to a bit of creative accounting. I’ll be particularly interested in the June exchequer returns. I have now come across three specific examples where payments were delayed until June relating to government payments in relation to tax refunds, training payments through Fas and social welfare sick pay. All of these amounts were months overdue but all got paid in June. Government accounts work on a cash basis, no accruals so even though the costs were incurred before June they are not recognised until the date they are paid. Nothing to do with the elections I’m sure.

It certainly doesn’t make sense that we have to rely on a range of proxies, while other countries have almost an embarrassment of riches, when it comes to timely measures of what’s actually going on.

This blog from New Zealand for example, a country of comparable size, lists seven separate indicators of the property market:

We can proxy most of these, just about, but often they are either lagged prices delivered in a timely fashion (ESRI), delayed (DOEHLG) or based on asking prices (daft.ie).

Incidentally, Karl Deeter is also discussing this:

In a completely unrelated matter I saw two articles written in the Sunday broadsheets saying that the housing market had reached the bottom.

In markets where perception = reality, it is totally justifiable (in their own minds) for powerful interest groups to persuade the general public to their way of thinking. If they do not, they are adversly effecting their bottom line.

@zhou-enlai: The right-to-privacy argument is not that convincing to me. Does the Irish constitutional right to privacy differ categorically from similar rights in the UK, US, Netherlands, et cetera, which have the currrent international best practice: full on-line disclosure. There are so many other rights which trump this weak and rarely-invoked right in the context of price disclosure. In a pinch, the government could offer a 1/4 of 1 % stamp duty discount for vendors willing to release price details. This would have zero revenue cost in a revamped stamp duty regime (needed in any case).

The government “having the information” but not using or releasing it is an empty gesture. The problem is that market participants need the information, not a government computer filing system (where it sits unused).

@Stuart: I agree your proposal would serve well, but I am inclined to prefer international best practice: full, on-line disclosure, if that could be managed.


I think the Govt want the market to hit the bottom as quickly as possible justlike we all do.

The reason the figures are not available is because the information has not been collated by the Revenue Commissioners, not because the Govt is sitting on them. I expect that this kind of market data role is outside their remit.

I guess the Govt could ask the IAVI to collate the data and publish in such a format to protect individuals. How trustworthy is that though?

Also, is it definite that publishing the data will speed up price drops while prices are still heading south? Would a seller not hold out for what their neigbour got a month ago? In any event, I suspect the data is too scant to be of assistance in most areas.

Why is Ireland one of the few countries in Europe where the personal confidentially of individuals completely over rules the need for a market to operate efficiently.

I’m not sure that the conflict is genuine. As I said, the Govt alreaady demands disclosure of the information. Perhaps they could publish it without breaching anybody’s rights? Similarly, the IAVI could require all memebrs to get vendors and buyers to sign a confidentiality waiver when they engage an EA.

However, if Ireland is the one of the few countries where individual rights and interests triumph over the market and the common good then I suspect it is because we are amongst the least densely populated, most spiritual, most community based, most gossipy, most begrudging and most self-effacing nations in the EU.

I would say it is because the vested interests resisted the transparency when it suited them.

Revenue have much much more useful information than that. Its pretty amazing how little is ever disclosed in any form to researchers.

The Irish Revenue has a very detailed analysis of all property transactions going back many years. It can be searched giving details of all purchasers & vendors for a particular road and is linked to individual tax payers´ records by way of their PPS Nos. Alternatively a Revenue official can input a PPS number or name and get a list of the transactions linked to a particular individual. The same system (it is referred to as IBI) also has details of car purchases & imports as well as details of dividends received and a variety of other information retained on taxpayers.

However, this information on property does not come from the stamping of the deeds, it is provided by solicitors separately on a special form for the purpose. The obligation is on the solicitor to return all property transactions, not just those with a liability to Stamp Duty. A deed is stamped by the Revenue but only a small number 5-10% would be examined in any detail, nor is additional information requested. Therefore the information is available but not through Stamp Duty. However, the Stamping system is changing with e-stamping, which will be up and running later in the year.

I suspect that the decline in residential property prices will continue for some time (years, rather than months). Prices should be closely coupled with the levels of wages and incomes (real ones). Since there is great uncertainty in the labour market, and there is an actual real decline in wage and salary levels – residential property will continue to decline in parallel. If (and its a big IF) the economy stabilizes, residential will continue to decline for several months, bottom out, then it will slowly start to increase. You must be careful about ‘bottoms’ – the current ones are more likely temporary saddle-points on the declining plot-line. Seasonal factors are also significant.

My guess, for what its worth, of the final destination, is price levels in the 1995ish range. This implies a lot of negative equity, which will have a consequential adverse effect on the residential market.

The number of residential completions for 2009, together with the number of residential starts , will be a good signpost of the state of the market. Keep calm until next spring.

Brian P

@AFC : the point is that its there, thanks for confirming. Q : is it worthwhile askign revenue for this data in aggregate form somehow?

Very well-made point about information being freely available so that
we know what we are dealing with as Stuart points out.

Now that AFC has indicated what raw data the Revenue Commissioners has, would a carefully worded FoI request for somewhat aggregated data be sufficient to establish just how good the data it and how useful it would be if the series were published back as far as possible?

Try it, Brian.


“The FOI Act is designed to allow members of the public access to information held by public bodies which is NOT routinely available. Access to information under the Act is subject to certain exemptions and involves specific procedures and time limits.”

@ Donal O’Brolchain: What an exciting idea you have proposed — using FOI legislation to force/prod/embarrass the government to release up to date house price info in some summary form. Many public groups are harmed by the nondisclosure of this up-to-date price information, and just a few special interests politically close to the government are advantaged. This is exactly the type of government manipulation of information FOI is intended to prevent. Forcing release is very much in the spirit of FOI as I understand it. Perhaps some of the most-harmed parties (real estate brokers, newspapers) could be persuaded to join an FOI request. Best of all is your suggestion that Brian Lucey leads the charge :). Brian now that the Infiniti conference is over you are not busy with anything else are you? Perhaps Alan Ahearne from within the government offices could speed or manage such an information release and its format.

@Zhou En-Lai: I take your point about “Irish exceptionalism” as a possible explanation for the information blackout but I find myself more persuaded by the simpler, albeit more cynical, explanations such as those by Stuart Blythman and Jamesp.

@RonanL: My thanks for the very informative links. I am sure others also found them useful.

As the effect of showing how poor prices are now, will be to depress further the revenue from property prices, I suspect they will resist this easily.

It would be better to show these stats, but don’t forget that Ireland has been sliding away from true democracy for years, with social partnership, special deals for strategic sectors, eg banking!!, it would fall to the administration to hand over information to all the partners. Not going to happen!

Property will fall in the 26, for about 5 more years. More if what happens later this year is really bad. Many investors were so well off that they did not rent out their property. As fortunes decline and people die property comes onto the market, available for use, depressing prices even more. As incomes fall and banks fail, capital disappears altogether. Those who have capital keep it renting cheaply, while watching prices fall to the levels when their parents bought. A classic deflation trap in asset prices. On the poor periphery of a poorer Europe ….. Acrone! Then there will be a scramble back in. That scramble will be over a decade away. At best.

Oh I forgot to mention all the development land coming onto the market. Far faster than we think! Malinvestment in the “good” times….. must be rectified before anyone will risk their capital. What a hangover! It must have been a good party!

Back in the land of eternal sunshine, Australian land seems to be immune, but all higher value housing is slow to shift and purchasers have fallen off considerably. Employment has wavered and is headed south very gently. Bizarre really. They are pinning a lot of hope on China and India. That will help a lot. The harvests seem to be very good this year. The drought is broken in most areas in most states, except S Australia. I expect reality to hit later this year. Lots of jobs lost then. Many humpys down at the beaches, their builders living off social welfare and surfing and fishing most of the day and orgies at night with Scandinavian backpackers… I though I’d throw that in…

Perhaps a new political party composed of the smarter and more scared of the present incumbents under the leadership of a charismatic young economist?

If the price of a house is an attribute of a house, could this isolate it from buyer/seller privacy issues?

Although aggregate data is better than nothing, it should be available at a unit level. How else will I be able to identify bank managers buying distressed properties at steep discounts 🙂

Personally, I believe honesty is the best policy and information should be shared. I just had a bad experience in the past with an EA telling a neighbour what somebody paid for their house.

In my first post I linked to the form which is used to submit the info to Revenue. However, the FoI request will fail as, to the best of my knowledge, Revenue have not input or collated all of this information. I suspect AFC is not working in Revenue.

A complication is that the fall in house prices is not uniform across the country,There are remote villages where the fall may be 90% and falling and there are good locations where the the fall may be 40% and levelling off.A Further complication is how valuations are going to be arrived at for NAMA when ther are no stats to support the valuation.

@Betty: You state “a further complications is how valuations are going to be arrived at for NAMA when there are no stats to support the valuation.” I would strengthen this — this is a deliberate complication, engineered by the government’s own information black-out policy. By blocking the release of information on house prices, the government gives itself an upper hand in constructing NAMA as it wishes — exactly the type of governmental manipulation of information release intended to be made unlawful under FOI? Or is that a misinterpretation of the spirit of that statute? It seems, perhaps, that this deliberate manipulation of information non-release, for political purposes.

Excuse my not referring to the link you posted

Having shown what data is being collected, the issue for Gregory and Brian and other analysts is to formulate a request based on the kind of aggregate data that they would find significantly useful.

It is not clear to me that not having collated the data is a sufficient reason to refuse the request. Under FoI, Revenue may charge for providing information requested.

If the FoI request fails because”Revenue” have not input or collated all of this information”, why is it being collected? As Gregory pointed out …. “The government “having the information” but not using or releasing it is an empty gesture. The problem is that market participants need the information, not a government computer filing system (where it sits unused).”

Gregory has pointed out that “As a basic principle of economics, price information release is almost always welfare-enhancing. There are some special conditions when this is not true, but as a general principal it seems pretty solid. So not having house price information goes against the public interest. It must be done for the benefit or one or more special interests, or for political purposes.”

As I have not seen anyone dispute this basic principle, it seems to me that a carefully worded request under FoI for aggregate data would assist in clarifying what is going on.

IMO, those who feel that individual transaction data should be available strike me, at this stage, as wanting the best which is, in this case the enemy of the good! What is the point in making it easy for the Revenue to refuse the request, by seeking data on each single transaction?

I urge those of you who would like to analyse the kind of data collected (as shown by the link in zhou_enlai’s first post) to formulate the request for aggregate data (broken down by month/year/price bracket/Dublin postal district etc/Dublin suburbs etc – all the other categories that could be significant) and submit it.

Surely between you, you could draw up the kind of request that would yield useful data. I assume a certain cooperation here, in order to get data, which may be naive of me! When/if you have the data, you can disagree on the significance, as part of the normal discourse of trying to understand the truth of the situation.

Making such a request would be in the public interest, if you want to provide the kind of analysis that we look to this site for.

Remember that we live in a republic and have the rights of citizens, not the liberty of subjects. It seems to me that this issue is critical and so it is timely to use our rights, inlcuding being prepared to pay the normal charges imposable under FoI.

There is no need to avoid making such a request just because other countries do it better or for fear of offending some special interest group or an assumption that it will fail. As Bacon said “There is no comparison between that which is lost by not succeeding and that which is lost by not trying”

Just do it – if you (GC, BL, ANOther) have not already done so.

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