Signs of life or April Fool? The latest Daft Report

The latest Daft.ie House Price Report was released this morning and contains what may be surprising reading for some. Across three different metrics, there were signs of improved activity in the market in the first three months of the year. Given we sent out press releases to journalists before midday on April 1, I did worry that some of them might think it all just an April fool!

Increased optimism

But the signs are there. The fall in asking prices in the first three months of the year was, at 1.4%, the smallest fall in asking prices seen since prices started to fall in 2007. “Smallest fall” mightn’t sound like particularly good news for homeowners but what was particularly interesting was the fact that the average asking price rose in a number of regions.

Of 26 counties, the average asking price rose in eleven. An average price increasing at the county-level despite general falls is not unheard of – every other quarter might see one or two counties buck the trend, before falling again the next quarter. However, eleven in one quarter is as many county-level increases as the previous seven quarters put together.

Over on Manyeyes, I’ve visualised the changes over the last three months by county – an overview is given in the graph above. I think what’s interesting is that there is an obvious difference between the “bottom half” of the island, so to speak and the stretch from Galway over to Dublin. This less than random scattering of increases also suggests something more fundamental at work.

Shifting properties

Why are sellers in many parts of the country being more optimistic, though? Some – such as NAMA Wine Lake – believe that we can read very little into analysis of the actions of 27,000+ sellers and this is probably just noise. However, what are other metrics telling us? Sellers may be more optimistic if properties are shifting.

There is some evidence, particularly in Dublin and Leinster, that properties are shifting. The total number of properties for sale in Dublin is at its lowest since mid-2007 while the slow and steady decline in the stock sitting on the market in the rest of Leinster continues: there are now 14,000 properties for sale in the province, down from a peak of 18,000.

One other metric we’ve been pioneering in the Daft Report is the proportion of properties selling within a certain number of months. Typically, one might look at time-to-sell of the average property coming off the market but in a market where some properties have been up for three or more years, averages will get skewed and not give a fair indication to someone selling at a realistic price now of how long it will take to sell a property.

The report gives the proportion of properties selling within four months of listing, for both December (30%) and March (33%). And – like the average asking price and total stock on the market – it does suggest a slight improvement in conditions in the first few months of 2012. One third of properties now find a buyer within four months. In Dublin, that figure is 40%.

As I’ve been saying on radio this morning, I wouldn’t be take this report and run off popping open the champagne in the certainty of the market having stabilised. Instead, it’s a step in the right direction. Recovery in the property market is about activity (not prices). There’s evidence from today’s report that conditions did improve in the first quarter of the year – but that could easily be undone by trends between April and June. In particular, without sufficient lending by the banks, it’s unlikely we’ll see any stabilisation and recovery in the property market.

The daft-myhome conundrum

For those paying attention, there’s an obvious clash between what this Daft Report is saying and what the alternative report, by Myhome.ie, is saying. Whereas the Daft Report shows these three indications of improved market conditions, the Myhome report reads like the Daft Report from January: they’ve seen the largest fall in their series yet.

I learnt recently that there is one large methodological difference between the two reports. While the underlying methodology, hedonic regressions, is the same (and is also used by the CSO and was previously used by the ESRI), Myhome use all properties listed on their site come late March, no matter how long those properties have been listed. Asking prices however reflect sellers expectations and in my own opinion it should only be expectations formed (i.e. properties listed) during the quarter that are counted.

The other difference is the sample size available to each website. Daft has approximately 50% more properties listed for sale than Myhome and this is particularly pronounced outside Dublin (in the capital, to the best of my knowledge, it is pretty much even).