Quote from Today’s IT Letters from Alan Cooke, CEO IAVI……

“On June 9th, 2008, the IAVI organised a meeting with the theme “Towards a More Informed Property Market” to examine the need for such a database. It was attended by representatives of three government departments, political parties, appropriate regulators, consumer interests and professional bodies. There, the IAVI representatives strongly championed the creation of a transparent and complete database for property transactions and a consensus of support for same emerged among those attending.”

The Data Protection Commissioner did not attend, stating he had no role in the issue .

http://www.demographia.com/dhi.pdf
Refer page 40

Cant say I believe the numbers particularly for median household income…..given the employment situation…..

But we also have this crowd http://en.wikipedia.org/wiki/Knights_of_Saint_Columbanus

PS: No offence intended to Freemasons, who I’m sure are all salt of the Earth gentlemen.

Now be fair you were never accused of devil worship. As a Freemason I know about secret handshakes and rituals but dark shadows refers to the Omerta that now permeates the present day Academic Economists that does not tolerate any view about the Irish Economy that is positive. If these people worked in the Private Sector they might have a different perspective on economics………………..try running a business with no hope for the future.

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@Derek Brawn This is the best ever time to push for a proper price index as all parties including EA’s agree for the need to bring confidence and better understanding to the market. All we need is a reforming minister to push for it !

PTSB/ESRI HPI is normally published end of the following month of the reference period, so June 2010 or Q2 index will be published on Friday 30 July

@JTO

Agree that median are better than average. Point i was making was that MK prediction was for ‘better parts of Dublin’. It’s what public & media focus on.

I was an economic migrant for 19 years - left in late-1980s like many others & like those that are forced to today. Now SherryFitz, Hooke & MacDonald etc. tell us that Dublin home prices are down 50%, but the part of Dublin that I grew up in for the 1st 22 years of my life, prices went up by > 1,000% in the decade between 1996-2006, so they’re still +500% more than when I lived in S.County Dublin. Just like KW, I couldn’t afford a shack, even at today’s lower prices.

We need a proper Land Registry HPI (with average + median, by area/postcode) just as the UK launched in 1990 following the Thatcher-Lawson Boom-Bust. By 1995 they had enough data to start a proper HPI based on RSR (repeat sales regression) i.e. same house, when it changes hands, price is recorded.

We’re now in year 4 (began April) of the Property Slump & we’re nowhere nearer to getting a reliable HPI. The ptsb/ESRI index is now produced only quarterly & represents only a tiny fraction of the market. The DoEHLG index is highly dubious as it is not mix-weighted, so more D4 homes for sale at huge discounts + fewer D24 homes sold at ‘flat’ prices = Increase in Dublin HPI????

yup, their property market is sinking like a stone … ia (buh-buh chiiiing!)

Very well-informed thread.

As an aside, if any ESRI people are on here, I’d be interested in knowing when the ESRI/PTSB house price index for Q2 (the only true metric of actual house prices we have) is next to be published?

Q1 showed a dramatic fall of 10% in Dublin and 4.8% nationwide - but the report was published at a time that a cynic could say was guaranteed to minimise press cover (e.g. late Friday afternoon on a bank holiday weekend).

http://www.irishlifepermanent.ie/ipm/media/pressreleases/permtsb/ptsb2010/2010-04-30/

At that time, the Real Estate lobby were busy trying to call a bottom to the market

If NAMA is affecting the property market, then it might be possible to estimate the increased cost of entry into the property market that NAMA might be incurring. Compare the current price with whatever model takes fancy and that is the cost incurred to the buyer. Renting might be dead money but that cost is dead money for the buyer anyway. How many months rent would that cover?

Personally I wouldn’t buy until NAMA started disposing assets. Buy at LTEV or lower and since NAMA isn’t selling the current market price has to be higher than LTEV.

If NAMA can’t sell, then NAMA has to rent out. I’m not convinced that NAMA is renting out all available properties. Cash outflow from NAMA might force NAMA to put more rental properties on the market. Increased supply with no change in demand -> lower prices.

We’ll just have to wait & see. My personal estimation is that rents will fall further. Double dip.

@Karl Deeter - is the study available online? Thanks.

@D. Brawn I agree completely with the crazy notion of 2006 as a normal or base year for property prices.

The study you suggest of going back to 1995 and examining whether the prices after that are fundamentally sound has been done a few times in the early 2000s by Dr. Maurice Roche (Nui Maynooth).

My more modest attempt in 2002 showed that house prices then could not be justified by the fundamentals and were already overvalued.

(Karl deeter can give you a copy of my 2002 study and contact details if your interested in discussing it)

When you get to D_Es other points, would you also be kind enough to dig out out the base GDP figure for 2009 you used to base your growth projection on?

I will indeed hogan, within the next couple of days.

I would have thought falling rents would be much greater cause for optimism, though I do admire your capacity to see the glass half full no matter what.

After all, rents on land are just about the only cost factor in the domestic economy which is truly under our control. Anyone interested in restoring competitiveness should want more rent falls, not an early stabilisation.

However, here indeed there is some call for optimism. According to Eurostat numbers, Ireland and Estonia are the ONLY countries in the EU in which rents have fallen in response to the crisis. (I’m calculating %Δ in prc_hicp_aind from 2007 to 2009):

European Union (27 countries) 0.042977323
Belgium 0.03770264
Bulgaria 0.184978413
Czech Republic 0.247893258
Denmark 0.056210335
Germany (including ex-GDR from 1991) 0.022030651
Estonia -0.510553448
Ireland -0.1121673
Greece 0.07108803
Spain 0.069372063
France 0.042577985
Italy 0.055906222
Cyprus 0.053196245
Latvia 0.066901905
Lithuania 0.181335157
Luxembourg (Grand-Duché) 0.052976516
Hungary 0.140196229
Malta 0.065322149
Netherlands 0.03900644
Austria 0.056827436
Poland 0.098103875
Portugal 0.054852321
Romania 0.250226729
Slovenia 0.060246301
Slovakia 0.075138985
Finland 0.07644774
Sweden 0.055120288
United Kingdom 0.049151028

So, they suddenly found that they no longer had time to do the rental reports just at the very moment when rents stabilised and even rose slightly? How very convenient.

Alas, I have a day job to go too. I will try and deal with your other points this evening.

The increases in rents is very minor John, we are showing 1.25% over the 6 months and I think we will see this reverse of the remained of the year. The CSO are showing even less of an increase. I expect the next Daft rental report will show a reversal of those small increases.

Just because something is bottoming out doesn’t mean it is then going to go on to increase John. I fail to see any fundamental reason that foreign nationals would start returning to Ireland when the ESRI has predicted than 120k people will have left the country in the 2 years to next April. People come for jobs not houses, we have lots of houses but very few jobs.

You have failed to address any of the other points I made in the post.

What exactly is the value of a scientific survey of house prices, based on the price of one house? I’m afraid that 25 million smackeroonies is a bit outside my range, so I haven’t been following price trends for such houses too closely.

But, a relatively small number of houses fetching prices that only the very rich can afford does have one important effect. Namely, it skews up the figure for mean house prices as distinct from median house prices. Most countries publish figures for both mean and median house prices, and generally median house prices are a lot lower (for the reason stated above). In Ireland, as far as I know, no survey publishes figures for median house prices, only mean house prices. The upshot is that, even at the height of the boom, the extent to which house prices in Ireland were out of line with other countries was greatly exaggerated. The only report I’ve ever seen that based its analysis on median house prices in Ireland was by that American company (Demographia, I think it was called - but, Michael Hennigan would know more about it than me). But, when it switched to using median house prices for Ireland, it found that house prices in Ireland, even back last September, were only about 60 per cent of those in the UK. Given the fall in the euro, the fall in house prices in Ireland since then, the rise in house prices in the UK since then, median house prices in Ireland relative to those in the UK are a lot lower now than then. The bottom line is: house prices for the ordinary family in Ireland are now a lot lot lower than in the UK, which anyone can check out if they have relatives in the UK.

That is interesting. So, you are saying that rents have stabilised or even slightly increased in the past six months. Both your survey and the CSO are now saying that. I don’t think that anyone was predicting that six months ago. And, naturally, it has got zero publicity in the media and on sites like this. How wonderfully convenient that Property Pin should drop your excellent survey the moment it shows rents stabilising or even rising. And, I’d say that the chances of Morgan Kelly mentioning in an IT article the fact that rents are now rising are about the same as those of Meath agreeing to a replay with Louth.

Of course, six months is not a long time. It could be a blip. We will know better in another six months time. But, it is at least possible that it is related to the clear slowdown in the fall in the number of arrivals of foreign nationals. During the recession there has been virtually zero net emigration of Irish nationals, but a sharp drop in the number of arrivals of foreign nationals, resulting in a net outflow of foreign nationals (which is ludicrously presented in the media as if it were old-style emigration of Irish people to Camden Town and Kilburn, when it is no such thing). Regardless, the fall in the number of foreign nationals is clearly now slowing down, in line with the renewed growth in the Irish economy. These are the monthly PPSN numbers for 2009 and 2010:

Jan 09: 17,532 - Jan 10: 13,470 - y-o-y fall: -23.2 per cent
Feb 09: 14,377 - Feb 10: 11,837 - y-o-y fall: -17.7 per cent
Mar 09: 15,204 - Mar 10: 13,083 - y-o-y fall: -14.0 per cent
Apr 09: 13,585 - Apr 10: 12,125 - y-o-y fall: -10.7 per cent
May 09: 13,493 - May 10: 12,497 - y-o-y fall: -7.4 per cent
Jun 09: 14,230 - Jun 10: 13,375 - y-o-y fall: -6.0 per cent

So, the number of PPSN numbers is clearly bottoming out, indicating that the number of arrivals of foreign nationals is also bottoming out. Based on these figures, there is every chance that the number of arrivals of foreign nationals will be rising again later in 2010. If so, this would have implications for rents and on the likelihood of the rise, that both you and the CSO have reported so far in 2010, continuing.

Thanks for that. I have a fair store of information on the background of the HPD and indeed current developments - it’s just that I hadn’t seen any issues being raised by the data protection commissioner (do you mean Emily O’Reilly’s office?).

Any tax that is built into a system is far less likely to face backlash than a stand alone tax, we don’t cry about VAT (although I do because financial services is a zero vat biz and we get charged it but can’t in turn charge vat), we don’t tend to find a way to evade income taxes - for those on PAYE, and many other built in taxes become ‘hidden’, we know they are there but they don’t cause a stir, property taxes - stamp, stand alone bills for rates etc. on the other hand don’t have this, so perhaps an incorporation into payroll would be a system for doing this or having some other mechanism that makes the process less painful than a once a year bill landing on the door. thoughts?

Agree that the linkage between Real Economy & Real House prices broke down in 2007 when Irish economy grew +6% in Output terms & +4% in GNP, whilst prices fell -7.3% nominal or -2.6% in ‘real’ inflation-adjusted terms. For 35 years before that, house prices & economy moved in the same direction. Obviously oversupply, over-indebtedness & persistently high jobless rate (despite future positive economic growth) will ensure that this link will not re-establish itself for probably the next decade.

In terms of models for estimating over/under valuation, why does everyone start with the peak years of 2006/07 assuming implicitly that these were ‘normal’. Why not begin a model with a base year when home values & economic fundamentals (including wage multiples) were at or close to equilibrium e.g. 1995. Then adjust forward to where house prices should be, taking into account inflation, wage growth etc.

@ John Muldoon
I know precisely what you’re on about. When I paid Council Tax in London, I received an annual statement of where my tax went to e.g. £146 Metropolitan Police, £220 Street-Lighting, refuse collection and so on. People are more likely to pay less grudgingly when they know where their money is being spent.

@KW & JTO

Trivia Question: What has been the biggest drop in an asking price of an Irish residential property?

Answer: Monte Alverno, Dalkey was listed @ 25,000,000 but has dropped in price by -13,500,000 or a reduction of 54%.

But this still represents +1000% Appreciation on the 1991 price - the last time this home was sold to the present vendor - or roughly +13% p.a. compounded.

So you’re question about the next decade post market bottom is extremely difficult to answer, cos’ even assuming 0% growth, on a long-term trend basis, these S.Dublin excessive prices will take decades to correct, back to a more meaningful annual average appreciation over time (e.g. akin to inflation + a couple of percent). German house prices in real terms are back to 1967 levels.

ps. MK has already been proven right as the biggest % drop in S.Dublin was Fairlawn, Saval Pk Rd, Dalkey (again) -65% in terms of asking price, from 6.25 million down to 2.2 million today

I notice nobody is talking about income figures. What’s the median wage in Ireland again? What’s a sustainable income multiple for the average couple to buy at?

Given that the banks are being pushed to prioritise SMEs for lending and they have a finite and diminishing pot of cash to lend, where is the credit for an stabilisation, never mind an increase in prices going to come from? Time to go back to being a long-standing regular saver and cultivating the local bank manager perhaps?

Finally, new house prices drive second-hand to a certain extent. In some areas (where new house supply is high), they’ll exceed old house prices (as why would you buy an old house when you can buy a new higher spec one for only slightly more). In other areas, they’ll be lower (as they just don’t have the character of the redbricks). In any case, there will be a relationship between the new and old prices. The banks no longer have an interest in new houses as they’ve offloaded them to NAMA. It is not their problem anymore, so they won’t feel any need to provide loans for newbuilds on a risky basis. They will, I believe, become ultra conservative with newbuild valuations, particularly given some of the quality issues that have emerged. This will restrict newbuild prices which in turn will have an effect on used stock.