Last week, daft.ie released its latest House Price report, which showed that asking prices fell another 4.7% in Q3 2009. Essentially, prices have fallen about five percent on average for each of the past 4 quarters. As I mentioned last week, though, this average hides regional variations. Some parts of Dublin have seen their asking prices fall by twice as much as some parts of Munster.
On the face of it, one could argue that this may just represent different strategies by sellers – in some parts of the country, they price low to get attention, in others they don’t bother and wait for the potential buyers to come in a certain discount below the asking price. There is quite a bit of evidence, though, that differences in asking prices do reflect differences in underlying transactions.
The first evidence is the total stock for sale across the country. The graph below shows the year-on-year change in stock for sale in four high-level regions. A positive number indicating more properties sitting on the market than a year ago – i.e. a bad thing. As you can see, Dublin is the only region with a significant reduction in the number of properties sitting on the market. In Munster, where prices have fallen least, the stock for sale is still rising.
The next graph compares the change in stock for sale and the fall from peak in asking prices to September at a more granular level – and thus more prone to regional data quirks. Nonetheless, the correlation coefficient – 67% – is quite high, suggesting that the relationship between falls in asking prices and stock for sale is not coincidental.
Economists think in terms of prices and quantities – most of the measures typically reported are prices ones (e.g. PTSB and daft’s own price index), but the two above are all quantity ones. Another quantity-based measure is to see what proportion of properties sell (or at least come down from the daft.ie website) in a particular period of time. Back in the boom days, one might have looked at a period of 2 months or maybe even 6 weeks, but the more appropriate measure now seems to be six months. The graph below shows the percentage of properties that come down from the site within six months (not quite the same as sales but presumably the trend is representative), across different regions of the country.
The measure is a three-month moving average to give some stability. What’s interesting is that by this measure, the “least desirable” region to be selling a property is not Munster (as it was by the total stock for sale), but Connacht-Ulster, which has seen some large falls in asking prices recently.
Across both metrics though – and indeed median time to sell – it seems clear that the last six months have seen an improvement in market conditions in Dublin (in transaction, not price terms), but elsewhere there is only the hint that things may turn around soon. And it seems that bigger reductions in asking prices have had something to do with that.
What’s unclear, though, is whether there’s a further round of causality. If some other region had seen the biggest reductions, would it have improving market conditions, like Dublin is now? Or was it always going to be Dublin first, because of the size of its market and/or its dominant role in the Irish economy?