International Data on Property Prices

There is no international standard for the reporting of property price indices.  However, it is still very welcome that the BIS has now made public its database on property prices for 37 countries. Details (and spreadsheet) available here.

22 thoughts on “International Data on Property Prices”

  1. For Ireland BIS’s only source is the DoEHLG average house price series – that’s the one that’s published six months after the relevant period and takes no account of the type of property (a 8,000 sq ft house in Dalkey is the same as a 1-bed apartment in Ballymun for the purpose of the working out average prices) and is based on mortgage-funded transactions only – seriously what real value has the Irish series?

    The other main source, the PTSB/ESRI index is excluded from the series. At least this index is hedonic and is produced within a month of the relevant period. Is any contributor here from the ESRI able to disclose the number of transactions that the index now examines (would have been about 800-or-so in Q2?) and what the statistical margin of error is?

  2. It is extremely badly presented and user-unfriendly, say, in comparison with the Demographia survey. But, that one only covers English-speaking countries. I can’t make head or tail of it. Can anyone cleverer than me tell us what figures it gives for current house prices in Ireland, UK, France, Germany, Netherlands, Belgium, Sweden, Denmark, Finland, eastern Europe etc? Then, we could judge whether or not current Irish house prices are above or below those of other EU countries. The Demographia survey showed that Irish house prices even in Sep 2009 (which excludes the 20pc fall since then) were allready well below those of most other English-speaking countries (except USA). It would be interesting to know if the same is true or not in relation to house prices in continental Europe. Then, we could judge better whether or not further large falls in Irish house prices are likely or justified by fundamentals. Obviously, if current Irish house prices are still higher than those in continental Europe, then further falls in Ireland are more likely, and vice-versa. Is anyone clever enough to extract this vital information from this survey? I’m certainly not.

  3. 93% of the land registry by area is complete. 300,000 properties in Dublin and Cork are still to be transferred in the Registry of Deeds, but there is work occurring in Ireland which will get us to a decent dataset eventually (next step is probably postcodes)

    As an aside, and perhaps most importantly, The INSPIRE directive requires that spatial data is harmonized across EU member states. 34 high-level dataset themes have been derived. This work of harmonization has to be completed by 2019 so perhaps its just a case of waiting…… waiting….. waiting….. and the EU will drag us up to speed eventually.

  4. @JTO

    Because the data is presented in different currencies (a pain to harmonise but if someone had the time to stick in current exchange rates then you’d solve that one) and different bases (some prices are in local currencies, others are by reference to indices), you’re not going to get a simple answer to your question and frankly given the laughable basis for Ireland’s contribution (average price of mortgage based sales but no account taken for different types of property) would the end result be much use?

    If you’re talking about valuations, hasn’t one of the ratings agencies already said we’re undervalued by what 10-20%? but the same agency predicted another 10-20% of declines without providing any detailed workings – I’d guess they’re projecting oversupply, population, unemployment, wages, taxes, sentiment etc.

  5. @ JS: “If you’re talking about valuations, hasn’t one of the ratings agencies already said we’re undervalued by what 10-20%? but the same agency predicted another 10-20% of declines without providing any detailed workings -”

    How about ‘follow-the-money’? Levels of disposable income + loan-to-value amounts? Or just the actual willingness of residential purchasers to take on a mortgage at this time!. The actual number of ‘closed sales’ is the critical number (annual total). This must be rising (over 3 yr period) for confirmation that the ‘bottom’ has passed through.

    My hunch is that private res property has only declined about half way (loss aversion and all that!). I expect the ‘bottom’ – if thats what its called – at mid-1990s prices. Well see.

    B Peter

  6. “Then, we could judge better whether or not further large falls in Irish house prices are likely or justified by fundamentals.”

    IMO further house price falls are inevitable in Ireland because the fundamentals still do not justify the current prices.

    With the rental yield still hovering just above 3.5%,according to the latest Daft report, I cannot see how prices will do anything but fall.

  7. @Brian Lucey

    Whats your (JtO) take on the housing market? Wanna pick a bottom….

    No. That’s a mug’s game. Especially if there is a shortage of information. That’s why I asked above if anyone can estimate from the BIS database how current Irish house prices compare with those in other EU countries. It seems that no one can. Either that or they don’t want to.

    I think it is a reasonable request to want to know how current Irish house prices compare with those in other EU countries. That is the only way you can judge if current Irish house are overvalued or undervalued. After all, if you went into a restaurant in Dublin and had steak and chips for 25 euros, the only way you’d know whether it was good value or not would be by comparing the price with similar meals elsewhere. If a similar meal cost 10 euros in Amsterdam, you’d know you were being fleeced. If a similar meal cost 50 euros in Amsterdam, you’d know you got a good price. Likewise with house prices.

    We know that the mean house price in Ireland is now about 200k euros. The median price is probably 10pc to 15pc lower, say around 170k to 180k euros. So, how does that compare with other EU countries? If the median price in other EU countries was 100k euros, we’d know that house prices in Ireland were still overvalued. If the median price in other EU countries was 300k euros, we’d know that house prices in Ireland were now undervalued. It is hardly that daunting a task for one of our many esteemed academic economits to do a bit of research and find out. Why doesn’t Morgan Kelly (from whom we haven’t heard much since the economy started to grow again at the start of this year)? If he thinks that median house prices in Ireland will fall to around 60k euros (which his prediction of an 80pc fall from peak implies), he could bolster his case by showing that such a price would be more or less in line with prices in other EU countries. But, I suspect that such wouldn’t be the case. I suspect that current median house prices in other EU countries are probably above 200k euros, implying that Irish house prices are allready relatively cheap in comparison. I can’t prove this scientifically, as I haven’t enough information (which is why I asked above if anyone could supply it from the BIS database). I do know, however, that Irish house prices are now cheap in comparison with those in southern England. I visited my cousin in Redhill, Surrey, a few weeks ago, and their modest house was valued at 450k sterling, or 540k euros, which is certainly a lot more than a similar house in Ireland would cost now.

  8. @Al

    Obviously we need McDonalds to enter the house construction market…

    At least with McDonalds, it would be possible to compare the price of a Big Mac between different countries. And, if someone predicted that the price of a Big Mac in Ireland was likely to fall to between one-quarter and one-third of the price in other EU countries (the equivalent of what some economists have forecast for house prices in Ireland), he’d be ridiculed.

  9. @ JTO

    That was my point…, you know, an effort to look smart by not stating the obvious…
    Anyway great to see your back and ready for anyone!

  10. @JTO
    Being slightly pedantic…it’s not really possible to tell whether you’re getting good value in Ireland by looking at comparative prices for houses, particularly if you compare with countries like the UK, Netherlands, etc.. Their population densities are HUGELY different.

    In any case, it’s theoretically possible that everyone is getting fleeced – at both €10 and at €50 for steak and chips.

    Other than that, local taxes are different, mortgage structures are different, pension provision arrangements are different, salaries, etc. If a reasonably undistorted rental market exists in a country then you could potentially do a comparison based on rent ratios. Ultimately a pure numerical comparison is not going to help a lot unless there’s a lot of insight around it.

  11. @ JTO

    That was my point…, you know, an effort to look smart by not stating the obvious…

    I do apologise, Al, for not seeing your point straight off. It is obvious now. I’m afraid that my brain is still only working at half-cock, after Tyrone’s disaster at Croke Park on Saturday. But, at least I recovered the will to live (barely) within 48 hours and resumed posting on Monday, while it has taken Brian Lucey 4 day to reappear here after Kerry’s defeat.

  12. Have to agree with Hugh.
    House prices are set by factors in their local market, mainly supply, demand and availability of credit.
    What house prices are in another country really doesn’t matter.

    Ireland has oversupply, falling demand and almost zero availability of credit.
    So, house prices here are falling, and will continue to do so until one or more of these factors changes.

  13. The Demographia International Housing Affordability Survey employs what is termed the “median multiple”, which is recommended by the World Bank and the United Nations and is incorporated within their Urban Indicators Programmes. Readers may also wish to refer to the Harvard University Joint Centre for Housing Research Median Multiple Tables for major US metros going back to 1980. This is accessible down the left column of my website http://www.PerformanceUrbanPlanning.org .

    There is no perfect measure of housing affordability of course, but the Median Multiple is adequate. Housing should not exceed three times gross household income – and if it does it is in bubble territory.

    I explained the importance of the Median Multiple within an article on Scoop NZ a year or so ago “Housing Bubbles and Market Sense” incorporating important observations by the author of Liars Poker, Michael Lewis in a Portfolio com article.

    The Demographia Surveys cover the major metros of the six countries – UK, USA, Ireland, Canada, Australia and New Zealand. We would like to include European countries as well, but regrettably have not been able to date to obtain appropriate data to do this.

    Suggestions welcome.

    Hugh Pavletich
    Co author – Demographia International Housing Affordability Survey
    Performance Urban Planning
    http://www.PerformanceUrbanPlanning.org
    Christchurch
    New Zealand

  14. @Hugh Pavletich
    Again, while the idea of a “sensible” multiple is attractive, it assumes that income taxation, property taxation, other local taxation, pension treatment, educational funding, the capability of the housing unit, population density, etc., are all somehow aligned. These financial/economic/technological things are usually NOT aligned. For example, if income tax were 10% in one country or state and 50% in another then it might be quite achievable and sustainable for people to pay house prices considerably higher than they could manage at the 50% tax rate.

    As in most markets, the key issue in the housing market is the type of market allowed, where “value” is actually added, and the intersection of these things with demand side aspects like lunatic levels of credit availability – as mentioned above by Pete.

    For many countries the added value is in the housing permission, not in either the land itself or in the construction. I’ve previously posted a link to the Australian parable of the frozen oranges (http://www.financialsensearchive.com/fsu/editorials/2007/0420.html), but it’s still an interesting read. The operation of some sort of “sensible” market for land and planning permission is – which I believe your survey has often said – key.

    Simultaneously, just to take one example, many countries will do all they can to protect family investments (especially highly leveraged investments) in housing assets while penalising investments in other assets thereby increasing the demand for house ownership over house usership, thereby driving house prices higher and penalising investment in productive assets over investment in unproductive assets.

    We have a longstanding situation where most countries have increasingly operated dumbass policies on both the supply and the demand side and yet they still act surprised when we get housing bubbles.

    Oh, one of your links from the Scoop article was to a paper which described Greenspan as a Savant Idiot. Having long used the term “hyper-intelligent moron” in similar contexts, I quite liked that article.

  15. Hugh Sheehy – its a pleasure communicating with an Irishman who has such an intellegent first name.

    I would have thought that with what Ireland has been put through with its unnecessary housing bubbles – that the major topic of conversation in public policy circles would be – what changes do we need to make to ensure we do not allow another housing bubble to erupt?

    The approach we are taking with the Demographia Surveys and the associated work these past six years (which has had considerable influence in Australia and New Zealamd in particular), is what could be termed the “structural urban economics” approach. You will be aware I have been harsh on economists as the Scoop NZ article “Housing Bubbles and Market Sense” illustrates – as just one example. Before too long I do hope we see structural urban economics developed further and inculcated within the training of economists, land use planners and property appraisers / valuers.

    Because of the poor underatanding of the structural aspects of housing markets, the economics profession has in my view got a lot to answer for. The consequences of creating grossly inflated fringe artificial land scarcity values should have – if economists had been trained appropriatly – sent them in to a frenzy. The economists were simply not equiped to articulate these problems effectively in the public arena. Because the economists “are at sea” on these structural issues, we shouldnt be surprised the planners and property valuers are as well.

    In any event we are making good progress here in New Zealand in particular in the political arena in starting on the path of dealing with these unnecessary housing bubbles. These issues are erupting big time in Australia as well – again – with their Federal election just two weeks away.

    We all know that there were not housing bubbles through middle North America, Germany and Switzerland. The “housing bubble victims” should be learning from them I think.

    Best regards
    Hugh Pavletich
    http://www.PerformanceUrbanPlanning.org
    Christchurch
    New Zealand

  16. @Hugh Pavletich
    Before I say anything else, please don’t get me wrong – I mean no criticism of the Demographia reports and have read several with great interest. I’m a fan of the reports. My only point, initially in response to JtO, was that one can’t necessarily make a definitive statement on house prices between countries based on simple price comparisons. Understanding of national features is required too. Land in the Netherlands or in England is simply scarcer than land in Ireland, for instance.

    However, the Demographia survey is a great effort and “sensible” multiples can be powerful indicators for an initial diagnosis of whether the housing market is working well or not. Michael Hennigan (Finfacts) has published several commentaries on the Irish situation and how the Irish market was not working well. IIRC he has used some of the demographia data in his discussions.

    Anyway, as you say, it’s important to learn from the past. The nature of the bubbles in different countries were driven by different mixes of idiocies on the supply and on the demand sides. Understanding the mix – with hindsight – will be helpful in understanding what “ought” to be the appropriate mix of policies to allow a stable and sensible housing market….one where “normal people” can afford “normal homes”. Unfortunately we’ve got a lot of bad examples to learn from.

    In Ireland and Spain (two countries where I watched the bubbles happen) there was – at some level – no limit to the absolute availability of zoned land but significant fixed costs were imposed on the land through development levies, by the political processes around zoning, etc.. Simultaneously, financing became available at preposterous levels, both for land and for finished housing. This availability of money made the politically imposed fixed costs seem affordable and politicians, bankers and developers all had reason to convince people of “affordability”. One friend in Spain commented to me once “People aren’t buying houses, they’re buying mortgages”, and you could buy a truly enormous mortgage.

    My impression (happy to be contradicted) is that the bubble here was initially, but briefly, driven by a real lack of housing stock and then became a long classical finance driven bubble. Spain too. The FSU Editorial implies that the Australian price issue is driven by zoning limits and not so much by finance. My understanding of Germany for instance, is that planning and local taxation regulations and limitations on borrowing all combine to effectively limit house prices while allowing new construction to be really high quality. Imagine, govt policy and regulation allowing people to live in affordable and attractive housing. Who’d a thought it?

    However, I entirely accept your point that not enough insight exists on these structural issues and that policy makers and economists alike should look again at what to do. Of course, Ireland has had at least two studies and two recommendations on major changes in housing policy in the last decades. Parliament ignored both of them.

  17. Hugh Sheehy

    Many thanks for your comprehensive response.

    May I suggest you and other readers on this excellent website interested in exploring solutions to these destructive housing bubbles, watch out for the announcements from the New Zealand Government September.

    We have had a “full on” public conversation of these issues these past six years here in New Zealand (and Australia too) and there is widespread agreement that the cause of these bubbles is governance / planning at the local level. In short a lack of planning responsiveness when demand kicks in, triggering these housing bubbles.

    Once they are triggered of course and speculative frenzy takes root with financing fuel of all sorts, one can never predict exactly how high they will reach, before they top out and fall over.

    So what our focus is way down on the other side of the planet – how do we get the appropriate institutional arrangements and legisllative changes in place, to ensure these housing bubbles are not triggered again?

    As I have noted before – they didnt happen in middle North America, Germany and Switzerland and I think we should be learning from these markets.

    Once again Hugh, many thanks for your response.

    Hugh Pavletich
    http://www.PerformanceUrbanPlanning.org
    Christchurch
    New Zealand

  18. @ Hugh P
    I’ll certainly keep an eye out for the NZ conclusion. Again, kudos for all the work on demographia.

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