The latest daft.ie House Price report was released this morning. It shows that asking prices have fallen 5.7% in the last three months and by almost one quarter since their 2007 peak. New figures on time-on-market are showing a growing gap between urban and rural markets, with properties in Dublin in particular falling more and moving faster and in greater numbers. Read more
Simple economic models often beat complicated ones. Figures from the last 25 years show a very strong relationship between the change in the unemployment rate and the change in house prices. This gives hope for those anticipating house prices to level off in late 2010 or 2011 – assuming oversupply has been priced in by then. Read more
The volume of transactions may be a good indicator of how overheated a property market is. Figures on completions, housing stock and mortgage approvals allow an estimate of the number of transactions by county. The figures for 2005-2008 show a set of counties – including Laois and a mid-west corridor – where almost 30% of properties were traded in that period. Sure enough, these figures correlate very highly with the percentage of properties currently for sale in each county. Read more
Yields are a vital indicator of the health of a property market. Dublin yields on residential property have fallen steadily from 7% in the late 1990s to about 3.5% in 2008. Realistically, they will need to settle at some level closer to 5.25%. With rents looking like falling 33% from peak values, this suggests a fall in house prices from peak values of 60%. Read more
With CPI figures showing inflation at -5%, the real return on saving has climbed to a 16-year high. A property-specific real rate of interest can be calculated from the mid-1970s on. It shows that over the whole course of the Celtic Tiger period, real property interest rates were negative. The real cost of borrowing for property now, however, is 15% – higher than at any point for which we have the figures. Read more
Figures from this blog on the rent-or-buy decision featured in today’s Irish Independent and have started some discussion on the most important factors for current prospective first-time buyers. This post includes a poll asking for your input on the topic, which will inform future posts on the topic. Read more
In this post, I take a look at the maths behind buying or renting. Amazingly, even in heady market of 2006, it was cheaper to buy than rent. With rates back down at very low rates, and generous mortgage interest relief, it is once again cheaper to buy than rent – and looks set to stay that way, unless there are significant changes to the tax system. Read more
A review of the latest trends in Ireland’s residential lettings market, from the Q1 2009 Daft.ie Rental Report, including a map of the changes in rents by county. Read more
Ireland’s property market is currently in rewind. Homes now are at March 2005 values – or July 2004, if asking prices are 10% above closing prices. Figures from daft.ie, the Census and the Dept of the Environment allow an estimate of both the number of homes now worth less than when they were bought – about 725,000, or 40% of homes – and how many of those are in negative equity -about 340,000, or 20% of homes. Read more
The US leads the way for many types of statistics – and in particular for their timeliness. The housing market is no different, with a plethora of measures such as prices and volume of transactions out every month.
In Ireland, though, we have to labour under a dearth of timely statistics on a range of economic indicators – including the housing market. Naturally, the Daft Report tries to make its contribution, publishing one week after quarter’s end so that people have the latest asking price and stock/flow information. One that I’m increasingly asked for is the number of months of supply currently sitting on the property market, a measure that’s well established in the US. It’s probably time we tried to put some numbers on it.
To do that, we need to answer two questions. The first is: what is a normal volume of transactions for the Irish property market? The second is: how many are on the market now?
On the first, the natural way to go about it would be to use the recent level of transactions. The only problem with that, though, is that the number of transactions has fluctuated wildly over the past four years, making that a somewhat erratic measure. To counteract that, the Department of the Environment have a long-run series on loan approvals, which for all intents and purposes tells us how many people are buying property every year. The numbers still vary hugely over the past two decades, in line with the vicissitudes of Ireland’s property market. In 1990, there were just 35,000 transactions – less than 3,000 a month – while in 2005, there were over three times as many transactions, 120,000 in total.
Taking the 2005 figure – or indeed anything since about 2000 – leaves open the accusation that one is deliberately underestimating the problem by overestimating the “typical” month. Then again, anything pre-1999 – and certainly anything close to 1993 – is probably not too appropriate either. To overcome this, one can view the last 15 years of Ireland’s property market as two stylized periods: a (relatively) healthy property market in the 1990s, where monthly transactions averaged 4,400, and a hyperactive property market, 2000-2007, where monthly transactions averaged 7,800.
Using the 2000-2007 figure gives us a lower bound, while using the 1993-2000 gives an upper bound. Given that Ireland is the guts of 700,000 residents bigger now than in 1993 (even allowing for outward migration), it probably makes sense to use the average of the two figures (about 6,000 transactions a month) as some sort of post-2007 reasonable estimate of what one could expect would pass through the market in a healthy post-crunch Ireland.
To answer the second question, how many properties are currently on the market, I’ve taken the daft.ie series of stock of property for sale. An adjustment has been made, given the way new developments are listed on the site, to make sure that vacant new builds are better captured than the raw figures may suggest.
After all those preparations, where are we? The chart below shows the best estimate (orange) of the number of months property sitting on the market from early 2007 to April 2009 – alongside upper (red) and lower (green) bounds, based on whether one believes that the 2000-2007 level of transactions is ‘normal’ or in fact when everything dies down we’ll see a return to much lower 1993-1999 levels of transactions instead.
In a normal property market, one might expect to see three or four months supply sitting on the market – that’s about how long it takes for a property to go through the cycle of litsing, viewing, agreement, closure. The graph above – if you accept the middle ground presented – is that there has been a over a year’s supply of property sitting on the market since this time last year, compared to about 5 months at the start of 2007.
Good news? These days, good news is really just absence of new bad news! The good news is that while there is about three times as much property on the market as normal, this has levelled off – and indeed fallen slightly – in the last six months.