Ronan Lyons | Personal Website
Ronan Lyons | Personal Website

Asking prices down up to 43%, Irish property market loses €180bn in value

The latest Daft Report is out today, a review of asking prices for residential property during 2009. You can find all the main details, along with a full commentary on the latest figures, and on the future of the property market, from Alan McQuaid of Bloxham Stockbroker over on the daft site. Here’s a brief overview of the headlines:

  • Asking prices fall a further 5.5% during the final quarter of 2009: falls in asking prices did not slow down in the final quarter of the year, with the fall of 5.5% similar in size to falls earlier in the year.
  • Time to sell now falling in most parts of the country: in most parts of the country, the typical property now takes about 9 months to sell, while in Leinster the figure is 7 months and in Dublin four months.
  • The total stock of properties for sale is lower than a year ago but remains high: the stock of properties for sale nationwide is about 3% lower than a year ago but remains above 60,000 units, while in Dublin it is about 17% lower.

As you can see, Dublin has very different headlines to most of the rest of the country. Here are the headlines for the capital:

  • Asking prices across Dublin are typically 35% below peak levels on average – from a peak of almost €460,000, the average price is now less than €300,000.
  • Prices in Dublin city centre have fallen by double-digit rates in three of the four last quarters and are now 43% below peak levels on average.
  • The typical time to sell in Dublin has fallen from 5.4 months in May to 4.1 in December, compared to an average of 3.1 during 2008.
  • The total stock of properties available for sale in Dublin has fallen by 17% during 2009, the largest fall of any region in the country.

Some of the headlines for the rest of the country are as follows:

  • Asking prices in Leinster are now about one third below peak levels, on average, with some counties such as Louth and Westmeath seeing falls of closer to 40%.
  • The total stock of properties for sale in Leinster at the end of 2009 was 5% below a year previous, and is now similar to levels in May 2008.
  • Prices in many of parts of Munster, including Cork and Waterford cities and county Clare are about 30% below peak levels.
  • In some parts of the province, such as Limerick and Tipperary, asking prices are less than one quarter below their peak, on average.
  • The total stock of properties for sale in Munster at the end of 2009 was slightly higher than a year previous (20,100 compared to 19,900) – it is the only region that has not seen some fall in the stock for sale.
  • Asking prices in most parts of Connacht and Ulster fell by more than 5% in the final three months of the year and are now about 30% below peak levels.
  • There were larger than average falls in Mayo and in Monaghan, while in Donegal, prices were actually close to static in the final quarter.
  • The typical time to sell in Connacht/Ulster has fallen back from peaks of over 13 months in September to 11.7 in December. This compares with 8 months in late 2008 and 3 months in late 2007.

About nine months ago, I tried to estimate the total value of Ireland’s residential property, based on the 2006 Census and current asking prices. I found that the housing market had lost about €100bn in value based on the falls up to that point. An updated estimate of the value of Ireland’s residential property is below, based on the latest asking prices and completion statistics (the latter coming from the Department of the Environment). The value of Ireland’s residential property is now about €393bn, almost €180bn below what it would have been, had peak prices been maintained. (The increase in the light brown series reflects newly completed homes.)

Value (€bn) of Ireland's residential property, 2007-2009
Value (€bn) of Ireland's residential property, 2007-2009

So, what prospects for the year ahead? Given that I’ve put my head in the noose already with a range of predictions for 2010, I suppose I might as well spell out my thoughts on the property market in 2010:

  • The overall determinant of house price changes will be the stock sitting on the market. As per above, that’s more of an issue outside the main cities. In Dublin, more significant falls in the stock for sale may lead to a levelling off in house prices by Q3, particularly if…
  • Rents start to level off in the big cities by mid-year. The stock for rent has risen hugely since 2007, but so – in a more hidden fashion – has the number of rental properties changing hands each month. It seems that the number of renters leaving Ireland is being outweighed by the number of would-be first-time buyers who are staying in rented accommodation longer. Rents will probably find a floor somewhere about a third below their peak levels, and at levels comparable to rents in the late 1990s.
  • This will give house prices a benchmark, in that those who look at property as an income stream have something stable to work off for yield purposes.
  • All this will happen in Dublin, and either contemperaneously or shortly after in the other cities, before it happens elsewhere. As a result, it’s hard to see anything other that an ongoing bit-by-bit falls in the smaller markets, where volumes will be thin on the ground. Sellers here are likely to continue to do what they’ve been doing up until now – let the cities find out where the floor is and follow them down.
  • A national average fall of 15% this year will probably hide a levelling off in at least some parts of Dublin (and maybe the other cities), due to ongoing falls in other parts of the country.

Now, let’s sit back, wait and see how wrong I am!

  • Daft Report » The Dossing Times ,

    […] Report Ronan Lynos has details of the Daft report. Asking prices fall a further 5.5% during the final quarter of 2009: falls in asking prices did not […]

    • Paul O'Connor ,

      Related to your total value of Ireland’s residential property calculations: Based on new instructions to agents, we calculated the total advertised value of the Dublin second-hand property market (including Bray-Greystones axis) in 2006 as €11,828,064,973. Same calculation for 2008 was €7,824,746,845.

      • House prices down by up to 43% from the peak - Politics.ie ,

        […] […]

        • Ralph Smith ,

          Ronan its great to see an economist putting their head on the line and predicting the bottom. The question now in my opinion is how informationally efficient the Irish Property market is. Will consumers and investors start purchasing again based on the information were beginning to see.

          Ralph
          http://www.domybooks.ie/Blog

          • Joseph ,

            How do these figures compare with the PTSB report that was out the other day suggesting that average house prices had fallen 27.6% since February 2007? Is there a big difference (I’m not sure if I’m comparing apples with apples so just looking for a professional opinion – are we being told one thing by one group and something else by another group?).

            Based on what I have seen locally (north county Dublin), the average drop is way below 27.6%. I would say closer to 45 even 50% (my own cost me 400k right at the peak and two doors down was sold for 195k recently by a landlord who needed to shift it fast – good job I view my house as a home and not an investment eh?) but there are also many cases of some people not moving their asking price and nobody going to view because it’s clearly too high in the current market (i.e. a disconnect from reality).

            Also I just spent the last two weeks in Donegal and I was amazed at how much prices have come down since summer 2008 when I was last up there. Prices back then starting with a 3 now starting with a 1 (and not even high 1’s).

            Does anyone have access to actual selling prices in Ireland rather than asking prices? That would seem a far more reliable indicator of what’s really been going on over the past two years.

            I think the bottom has some way to go yet – maybe it will plateau for a while but once unemployment gets to 13% (which even the government confirms?) there may be a ‘double dip’ as there are bound to be a number of repossessions and cheap stock hitting the market that will drag it down again overall in late 2010/early 2011?

            Sorry to sound so gloomy but I think there are a lot of people out there in the property business who perhaps don’t want to face up to reality.

            • Ronan Lyons ,

              PTSB is probably lagging the market at the moment, due to its nature (mortgage drawdowns, which could be 2/3 months behind agreed transactions) and its source (only ever 20% of the market, and that’s 20% of a very small market at the moment). Hence the fall in asking prices is greater than the fall in closing prices, so measured.

              The only people who have access to all sales prices are the Revenue Commissioners who could, if they wanted, suitably anonymise (or not) their data and make it publicly available. Fingers crossed!

              • Senan ,

                • Cathal ,

                  A 15% fall in house prices on the Daft measure for this year sounds about right. Unemployment will continue to rise this year to about 14%, the economy won’t show much, if any, growth and mortgage lending will remain constrained. All these factors militate against the kind of recovery predicted by Bloxham’s and point towards a continuation in the fall of house prices. Given that house prices have already fallen by quite a margin, a 15% decline this year is very reasonable indeed.

                  • Kevin ,

                    14-18 times annual rent or 3.5/4 times average salary.
                    So for your average 3 bed semi – we need to be looking at ~160K in average parts of the country….
                    Dublin still around 300k plus, so that means a rental yield of €1350pm, dublin asking prices are somewhere around this at the moment, however nobody knows what rent people are paying….i’d guess in dublin 1000 pm would be a reasonable yield so should be looking at house prices ~260k mark – which is ~13% fall. Howerver, I reckon, a lot of foreigners will leave q1/q2 as the 15months time frame on claiming prsi/job seekers will be up and things will not have picked up as there will be very little building and retail is dead. The same for the single Irish people who will just emmigrate as other places will be picking up by then….

                    • Ronan Lyons ,

                      Kevin,
                      It might interest you to note that in the latest Daft report, the average 3-bed was €175k or lower in 11 counties.
                      One other thing to note is that it’s 4 times household salary, rather than individual salary, and the typical household has 1.55 earners.

                      R

                      • Kevin ,

                        Check average rental prices for dublin1-24. It about 1300 per month according to the q3 report. As with average salary (of 1.55 earners) it is somewhere between 52-50k. That’s 200k. [Also if one adds an average of 2 kids that’s another 300 per month to pay the mortguage, however, i’ll admit I did the calculations very quickly – E&OE!!!) Also, I am in the rental boat waiting for further drops 🙂 In anay case we are both agreed we are looking at ~15% drop this year and that’s conservative. As for Bloxham, can’t workout where they can manage a growth of 10% in housing this year……

                        • Negative Equity « SmartQuotes.ie ,

                          […] In November 2008 the average mortgage was €259,217. This was most likely borrowed at 90% loan to value, resulting in a property purchase price of €288,801.  According to Ronan Lyons (Economist with Daft.ie) prices across Dublin (as an example) are down 35%. […]

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