Ronan Lyons | Personal Website
Ronan Lyons | Personal Website

dublin

Irish house prices fall 4% since the start of 2009 – latest daft.ie report

Ireland’s property slump marked it second birthday today, with the news from the latest daft.ie report that asking prices for residential property fell 4.2% in the first three months of 2009. This latest drop in prices marks the eight consecutive quarter that prices have fallen.

As the official press release notes, the national average asking price now stands at just over €280,000, meaning that prices have fallen almost €70,000 from the peak in early 2007. What’s interesting to note at this stage is that Dublin was worse hit on average over the first quarter – in particular Dublin city centre, where prices fell by 11%. Other notable falls since the start of the year are Sligo and Waterford city, where prices fell by about 10% in three months.

The fall in the first three months of the year should not be underestimated, particularly as the year-on-year rate of change has now slid to -15.7%. Nonetheless, a graph of the quarterly change in asking prices gives some food for thought. The falls in house prices got worse and worse more or less every quarter from mid-2007 on – until now, as the diagram below shows. How much we can read into this, though, will have to wait until next quarter, when we can see if the trend continues.

Change in national average asking price from quarter before, source: daft.ie
Change in national average asking price from quarter before, source: daft.ie

Commentator for this report is Liam Delaney, a behavioural economics expert. He discusses the importance of psychology – and the value in terms of self-worth of things like owning a house or having a job – in current economic conditions. He draws an important distinction between public and private sector workers (or at least that’s how I interpret it):

This report – combined with the recent labour force figures – indicates considerable hardship for those in once solid middle-class jobs that are now facing a potential double-whammy. People will inevitably feel even worse when they see neighbours and friends who are in better situations. Consider the position of a college graduate who purchased in Dublin in 2006, based on the income from his financial services job (now gone), to the position of his neighbour who secured a public sector position on leaving college and purchased in 2001. While neither is laughing, the latter must at least be considering himself the better off of the two. They are certainly not in the same boat and the widening rift in society being generated by asset price decline and employment uncertainty is the defining theme of our time. As described by John Fitzgerald and others, there are many who are currently better off than last year, as they are facing declining prices and interest rates in the context of stable employment in their sector.

He also describes two scenarios for the future, drawing on Gerard O’Neill‘s own commentary on a previous Daft report, where he suggested that the current economic maelstrom in which Ireland finds itself is probably the only thing that could possibly ever turn Ireland into a nation of renters – the implication being that may just happen. Liam then walks through the implications of these two scenarios:

One version of a national narrative that was articulated in the previous commentary by Gerard O’Neill was the idea that the Irish cultural and psychological need for property may be displaced by a culture where renting is given more credence as part of a normal adult life. Were such a story about the Irish relation to property to take hold, it would clearly have substantial implications for any potential future rebound in property prices. Key players at the moment are those who can afford property but are riding out the current uncertainty by taking advantage of falling rents. If they follow Gerard’s story, they may never come back into the buying market and the next generation may follow them into long term renting.

Yet, we still hear strongly the story that the Irish have always been and will always be wedded to the idea of home ownership as a fundamental part of maturing into adulthood. If such a story about Irishness and adulthood maintains its hold, house prices will eventually settle at a higher level, and changes in the market will depend on macroeconomic conditions, rather than on the type of seismic shift in Irish culture described by Gerard.

I’ll be posting each day this week on different findings from the latest figures, starting tomorrow with a Budget-day special… did someone say an Irish property tax? Later in the week, I’ll also look at the stock of property for sale – which incidentally has now fallen, however slightly, each of the last six months – but before I do, a quick comment on asking prices versus closing prices. Accurate measurement of house prices is a hot topic at the moment – it seems the ptsb closing price index reached a minimum fall in year-on-year terms of 10%, while asking prices haven’t yet found their nadir.

Changes in asking and closing prices, 2007-2009
Changes in asking and closing prices, 2007-2009

The full report is available at www.daft.ie/report and contains, as mentioned above, a commentary by Liam Delaney, Lecturer in Economics with the Geary Institute, UCD, as well a regional and county-by-county analysis of the latest trends in the property market.

So long recession (for a day at least): Streamgraphing Ireland's Twitter-news!

Another month, another visualization method!

This time it’s Twitter StreamGraph, which tries to show a river of topics related to a keyword over time. It’s early days for this particular method, I think – having a range of options, such as number of tweets, or a particular time period, etc., would be very handy, but still a very promising tool. My first use is below…

Ireland Twitter StreamGraph
Ireland Twitter StreamGraph

The Twitter StreamGraph above shows the last 200 posts from this afternoon. Not surprisingly, given it’s our first decent snowfall in Dublin in about six or seven years (and even that one was a gone-in-a-day jobbie), very little about recession and instead lots and lots of snow!

Hair of the dog: With rents fallings, ECB cuts the only thing likely to drag yields above borrowing cost

The third and final (for 2008 anyway) instalment in the visualizations of Ireland’s property market takes a different look again to my recent posts on trends in prices and stock. Building on the measure of affordability on page 10 of each daft.ie rental report and a suggestion made on thepropertypin.com, it measures the gap between the expected yield and the cost of borrowing.

The result is here on Manyeyes. Blue means the cost of borrowing is greater than the expected yield, while brown means the opposite. Below, two quarters are shown – 2008 q3 and an estimate for 2009 q2.

The gap between the cost of borrowing and property yields in Ireland, 2008 q3 and an estimate for 2009 q2
The gap between the cost of borrowing and property yields in Ireland, 2008 q3 and an estimate for 2009 q2

What is clear is if that one takes a measure of this gap as a measure of market disequilibrium, the market remains overpriced. (There are of course plenty of reasons why rents as a proportion of house prices may not be the only measure of a housing market in balance, particularly where rental markets are small or negligible, but bearing that in mind, let’s proceed…)

To look ahead and see if this mass of blue is likely to change any time soon, I made some assumptions about interest rates, asking prices and rents, based on what we know now. I assumed that interest rates fall to 1.5% in June 2009, and that house prices and rents both fall 5% quarter-on-quarter in the first six months of next year, as high levels of stock in both segments take their toll. I’ve also assumed landlords will still get 11 months of the 12 in rent and that the rate at which first-time buyers borrow remains about 1.1% above the ECB rate.

I’m sure there are plenty of ways people might disagree with particular aspects of those assumptions, but I think they make, if nothing, else a starting point for discussion. (Take them as a straw man if you don’t like them!) Anyway, if those assumptions were to be borne true over the coming six months, the first thing to note is that yields would be largely unaffected – i.e. not going in the direction they should be, up towards the equilibrium long-term average cost of borrowing somewhere north of 4%. (It should be pointed out at this stage that yields in certain market segments, e.g. West Dublin 1-beds, are already very close to 5%, so averages certainly hide some interesting sub-county variations. For more check out page 10 of the last Daft.ie report.)

However, a collapse in interest rate – albeit gradually – in a steady-as-she-goes ECB version of the Fed’s record peak to trough interest rate journey would have the not unexpected consequence of turning all those blue spots brown. Well, most of them anyway. Once again, the prognosis is not good for Leitrim and Cavan, two of the counties with among the worst stock overhang in the country, on a per capita basis. Even with interest rates collapsing to record lows, that would not be enough to make the rate of return on property greater than the cost of borrowing.

Is the cure the world is adopting a central banker’s version of the hair of the dog that bit you? Or are we entering a phase of the world economy where caution is so predominant that low interest rates are the appropriate response?

Breadcrumb history gets underway: So, who was "Bully" Egan?

A couple of weeks ago, I wrote a post about Dublin in the 1780s. While the whole idea of a suburb called ‘Hell’ was what got me writing, references to characters long since gone, such as “Bully” Egan and Yelverton, got me thinking: ‘What do we know about these guys? Can we bring them guys back to life, at least in some sense?’ But then I thought, hmmm, that’s a bit tangential – where would that lead me next? And then, I though – that’s right… where would it lead me next? Twenty iterations later, it would be quite a journey from start to finish.

So, welcome to “Breadcrumb History” – I’m hoping this will be an ongoing ramble, from Dublin’s 1780s Hell last time round, through today’s subject, the bauld “Bully” Egan himself, on to something else next time – more on that later! But first off, who was this legend, “Bully” Egan and what did he do to write himself into the history books?

It turns out that there are a few little scraps that can help us bring Mr. Egan back to life – there’s even a portrait, which for licensing reasons I won’t embed here, but to what he looked like, just click here.

John “Bully” Egan was born in 1754, in Charleville, county Cork, the eldest son of Carbery Egan, a member of the “ancient and numerous” Egan family, originally from county Tipperary. His father Carbery was also born in Cork, in 1720, and at the age of 20 entered Trinity College, Dublin, graduating twice, in 1743 and again with a Masters in 1747. In 1748, Carbery was ordained deacon in the Church of Ireland at Cloyne and served in the parish of Charleville until 1770 (he died a year later).

Like his father, John Egan went to Trinity College, Dublin, before going on to study law in London, returning back to Dublin to marry “a widow lady of some fortune”. Described frequently as a ‘corpulent’ man, he was admitted to the Irish Bar in 1788, and in 1789 entered Irish Parliament, as a member for Ballinakill, Queen’s County (Laois). From 1790 until 1800 and the Act of Union, sat for Tullagh, an area near Baltimore, County Cork (more on the Act of Union, which changed his fortuntes forever, later).

So far, so dry. We still have to get to why he would be remembered fondly as “Bully” Egan. To answer that, there are two more parts to the story – one on why he was remembered as a character, and the other explaining why he was called “Bully”. On the latter, from 1790 to 1800, he was Chairman of Kilmainham, in Dublin – i.e. he was County Court Judge. As part of the deal – jobs such as that being quite the prize back in the day – he owned some of the land out in Kilmainham. His nephew, Pierce Egan, probably the most renowned boxing correspondent in early nineteenth Century England, while in Dublin many years later, visited the grave of ‘Sir’ Dan Donnelly, the famous Irish boxer, at Bully’s Acre, near Kilmainham. In his work, Every Gentleman’s Manual (1845), Pierce states that ‘Bully’s Acre’ gave its name to his uncle John, its erstwhile owner. (Incidentally, Bully’s Acre seems to be quite a common term for older burial grounds in Ireland.)

That explains the Bully part, I guess. What about the implication that he was a bit of a character? Well, true to form, he did have an adventurous side, being a noted duellist (presumably being called “Bully” Egan, no matter how innocent a reason, helped strike fear into his combatant!). John Reid’s 1971 biography of Pierce Egan contains this interesting passage of the antics that Bully Egan got himself involved in:

He appears to have been celebrated less for his own wit than for being, like Falstaff, the occasion of wit in others. It is recorded that he once challenged his intimate friend, Curran, but when the time for the duel came round, Egan complained of the advantage his bulk gave to his adversary. ‘I’ll tell you what, Mr Egan’, said Curran. ‘I wish to take no advantage of you whatsoever. Let my size be chalked out on your side and I am quite content that every shot which hits outside that mark shall go for nothing.’ ‘Bully’ Egan’s retort, if any, has not come down to us, but the duel was fought without injury on either side.

Pierce Egan wrote that ‘in a law contest with that great wit and eloquent pleader, the Master of the Rolls, Mr Grattan, observed “if that latter did not leave off his abuse he would put him in his pocket”, an allusion to his being a small man. “If you do so,” replied Grattan, “you will have more law in your pocket than you ever had in your head”.’

Yep, that’s presumably the same Curran that was mentioned in the article on Hell. (Incidentally, the third name in that article – Yelverton – seems to refer to a lawyer and an MP from more or less the same time, according to one of his descendants still in the legal business.)

In the final debate in the Irish Parliament on the Act of Union, Bully Egan is said to have delivered a strong speech against the motion and is said to have exclaimed, after sitting down upon finishing his speech: “Ireland – Ireland for ever! and damn Kilmainham!” With the Act passing, his vote against Union saw him deprived of his ‘chairmanship’. John “Bully” Egan died in poverty in Scotland in 1810.

Fortunately, though, the Bully Egan story does not end there. James, one of his sons, went to Germany in the early 1800s and became a page at the Court of Zweibruecken, in that interesting period after the French Revolutionary expansion into German lands but before German unification later in the century. James later moved to Austria and had four sons. His eldest, also called James, became a professor at the University of Budapest. Another son, Alfred, became Chief Engineer to the Hungarian State Railways and acquired large land-holdings in Hungary. Alfred’s eldest son, Edward, that is Bully Egan’s great-grandson, was Inspector-General of Dairy Farming for the Hungarian Government, while Lewis, another great-grandson, was Chief Engineer to the Maritime Government of Fiume, better known to us now as Rijeka, in Croatia, a town I’ve passed through twice on my railway travels.

So, that was certainly some tangent, and it’s definitely presented a whole host of new tangents to look up… I’m happy to take suggestions for the next instalment of breadcrumb history – if my Polldaddy extension works, you should be able to vote on your choice below!

[polldaddy poll=1063622][polldaddy poll=1063622]

EDIT: I’m not sure why, but the poll doesn’t seem to be showing… Will try and fix. In the meantime, you can vote by clicking this link straight through to Polldaddy.