This week’s daft.ie report revealed some intriguing findings in relation to the current state and trajectory of Ireland’s property market. As was discussed yesterday, for example, while east peaked earlier than west, north has fallen further than south since the peak. One of the conclusions of both these findings is that Dublin and its commuter counties have experienced falling prices first and deepest.
This goes somewhat counter to conventional wisdom, although conventional wisdom hasn’t done too well in the last couple of years it must be said! Conventional wisdom would suggest that whatever about the Section 23 wastelands and ‘ghost estates’ of Ireland’s mid-West and elsewhere, the capital – as focal point for Ireland’s public and internationally trading sectors and their upstream and downstream employers – would be alright, at least in relative terms. In an Ireland where prices fell 20% in the crash, Dublin might be 15% or so while “somewhere else” would be worst hit.
While easy to mock, there is something in this from a long-term perspective. I have argued before on this blog – in December and again in February – that the ‘overhang’ of property looks a lot worse, even with just approximate calculations, in the mid-West than in the capital or indeed any of Ireland’s five cities. With stock falling slightly in the last six months, no harm revisiting the ‘overhang per county’ chart again, with stock levels taken from today.
Again, the message is pretty clear – Cavan, Donegal, Leitrim and Roscommon have significant property ‘overhang’ compared to the likes of Monaghan, Kilkenny and Dublin and its commuter counties. The conclusion that I would draw is as follows: as it is home to the vast majority of Ireland’s top earners, to the extent that Dublin’s property market priced in expected future GDP and wage growth – i.e. confidence – it is to be expected that prices will fall most there, as confidence collapses from a high in late 2006 to a low in 2009. (The implication is that prices would be more likely to turn around faster, were confidence to somehow rematerialize.)
Taking a longer term perspective, though, unless prices adjust faster in places like Donegal, they face the prospect of longer peak-to-trough. Indeed already, some on theproperty.com are fretting about the future of places like Roscommon. On a thread entitled “Rents getting very cheap in the west“, mikewest’s message makes glum reading for property holders in Roscommon:
The house prices down here are still utterly crazy because something the developers never noticed is that there is shag all work in Co. Roscommon and if you dont have work then nobody wants to live there. People talk about the ghost estates in Longford and Leitrim but they don’t hold a candle to Roscommon. Every village and town has empty or virtually empty estates and / or apartment blocks…
There is another teeny tiny problem in the west. There are one or two houses too many in some towns right now so asking prices for rents are really more aspirational than actual but not quite as aspirational as asking prices for houses.
Today, I hope to give a little more detail on the findings from the report itself, in particular regional trends, and then give an international perspective also – or at least start to give one, which I think is always instructive. Below is a graph showing the quarter-on-quarter change in asking prices for the last two quarters, i.e. Q4 2008 and Q1 2009, in each county. The most obvious finding – probably not a surprise to anyone – is that asking prices fell in almost all counties in both quarters. A second clear finding is that there does not appear to have been one or two counties more affected in the last six months than elsewhere (although one could make the argument that Munster has got off relatively unscathed since September).
Quarter-on-quarter changes in house prices, 2008q4-2008q1
What also jumps out is that the two quarters saw very different patterns. In the final three months of 2008, a few counties – such as Galway, Westmeath and to a lesser extent Donegal and Leitrim – saw the largest downward adjustments in asking prices. Two counties, Mayo and Tipperary actually saw no fall in their asking prices. This quarter, Mayo and Tipperary actually had slightly larger falls than average – perhaps a sign that sellers there had been holding for the start of the year before acceding to the realities of the market. On the flip side, sellers in Galway and Westmeath believed in Q1 that their large adjustments in late 2008 did not need to be followed up with more adjustments straight away.
Sligo has been the worst hit county in terms of falling house prices, with a fall in the region of 10%in three months alone. (Dublin city centre and Waterford city actually saw bigger falls but they are lessened by other parts of their counties.) Aside from that, it seems that Dublin generally and the counties around it were among those with larger adjustments since the start of the year.
This leads on to perhaps a more interesting question – how have counties fared since their property prices peaked? To do that, I’ve set up another Manyeyes dataset (which anyone can access) with the percentage gap between house prices in a given quarter and the peak, for each county. Where a county is sandy coloured, that means it has peaked. The deeper the blue, the bigger the fall. (One little trick with these figures is that for a county’s earlier “blues”, prices are still going up. By the second row, that’s no longer an issue.)
Change in asking prices from the peak, 2007-2009
A couple of findings emerge, based interestingly on alternate axes of the country:
East peaked before west, on average, and by almost six months. If you draw a line from Cavan down to Wexford, 10 of the 13 counties peaked in the first half of 2008, more than half the country in population terms, including all of Dublin and its offshoots. Cork, Galway, Limerick and a few other counties actually peaked in the second half of 2007, while a couple of stragglers – Tipperary and Westmeath to be precise – only peaked in early 2008. (Interesting to note, in passing, their sellers’ totally different reactions to conditions in late 2008, as per the first chart above.)
North is falling faster than south, on average. If you draw a line from Dublin over to Galway, 9 of the 10 worst affected counties so far come from that half of the island. The top half of the property market – literally! – has been lopped off more than the bottom half. This means that the north-east – essentially Dublin-plus – fell first and is falling hardest, while the south-west – Munster – was last to fall and has fallen least so far. It will be interesting to compare these emerging trends, two years into the property crash, with the final statistics on Ireland’s property readjustment/crash/Armageddon/return to sanity/fill in name here.
Speaking of writing the history books, perhaps it’s no harm to have a quick look to our left and our right and see how other property markets are faring. Below is a chart of about 20 countries (with two different measures in there for the US, the first is the OFHEO measure, while US* is the Case-Shiller national index). I’ve based this on data posted on the Economist’s website, but have surreptitiously replaced the 2007/2008 ESRI data, about which there is a lot of scepticism currently, with daft.ie data. The bars show the annual rate of change in house prices, including a 1997-2008 average, and figures for 2007 and 2008. (As per the Economist website, some of the Q4 08 figures are actually Q3 08 while a couple, including Ireland, are Q1 09.)
International comparison of property markets, 1997-2009
Replacing the ESRI data with the daft.ie had the effect of moving Ireland from the “Club of Moderates” such as Denmark and the Netherlands, to the “Bleeding Edge” group with Hong Kong, the UK and the US (at least one measure for the US at any rate). I will do my best to try and track down the original data for this series so that a change-from-peak measure can be contructed as again that may be more instructive than a year-on-year change, particularly in six months time.
In the meantime, though, I’ll leave this up here and ask for any insights, comments or queries, as per usual! Fire away…
Yesterday, the latest daft.ie report was released. More details here, but the overall gist is that asking prices fell 4.2% in the first few months of the year. Coupled with the falls in 2007 and 2008, this means that asking prices are now down 18% in two years. On the face of it, this may not have much to do the Budget being released today, which has to deal with more pressing issues of the public finances, unemployment and the banking crisis. However, to say that Ireland’s stock of wealth tied up in residential property should have no role in plugging Ireland’s E25bn public finances gap is myopic in the extreme, particularly given Irish wealth-holding tendencies. Even if we rule out a property tax, we should at least know how much we’re throwing away in potential tax revenues, and this blog post hopes to establish approximately this potential is.
No harm, first, to recap the fiscal crisis Ireland faces, outlined in the chart below. In 2007, the Irish government expected that in 2009, tax receipts would be in the region of €56bn. By last week, the expected revenues for the year had slid down to €34bn. This €22bn gaping hole is staggering, as it represents a collapse of 40% in revenues. Any organisation with a 40% collapse in revenues has to re-examine its entire business model and Ireland is no different. Fixing the €20bn-plus gap between income and expenditure will require taking more money in and spending less. My contribution on the debate about spending less is for another day – you can probably get some inkling of what I think here – but on raising more, we have to look again at property. Property taxes in Ireland are based on transactions – we now know, and probably deep down knew all along, that the huge amounts the government was taking in over the past few years were totally unsustainable.
Government estimates of Ireland's 2009 tax take over time
If we don’t tax property transactions, how will we tax property? And what contribution to plugging our €20bn gap can property make? Recent articles by the Sunday Independent and the Irish News of the World have discussed the scale of how much has been wiped off Ireland’s property market, while the combined report by stockbrokers Davy, Goodbody and NCB mentioned the potential revenues that could be earned by introducing a property tax in Ireland. So just how big is Ireland’s property market? The answer is about €460bn, as is shown in the graph below. The graph uses 2006 Census data on the number of households in each county, Dept of the Environment figures on new houses built in each county since 2006 and daft.ie quarterly average house prices by county.
The value of Ireland's residential property, 2007-2009
The graph also shows that the total value of Ireland’s residential property is about E100bn less than what it would be were no crash to have occurred. A similar amount has also been wiped off Ireland’s stock exchange, which is plotted on the same scale to allow comparison but whose remaining value is €30bn, compared to the €460bn still in Ireland’s homes.
Supposing the housing crash continues so that Ireland’s 1.6 million homes are worth perhaps E400bn by the time they bottom out. While well below the €600bn or so that it “could” have been, this still represents a huge potential stock of wealth that is largely untaxed. Simple maths says that a property tax that averages 1% could raise €4bn per annum. Assuming that the government will be aiming for a three-year correction to 2012 that lifts tax receipts by €10bn a year, while it cuts spending by €10bn a year over the same period, a property tax could solve 40% of Ireland’s tax woes. The average household’s annual tax bill would be less than €3,000 – or about €50 a week.
How would a property tax work? There are of course some significant issues that Ireland would have to iron out first, before a property tax could come in. For example:
Politically, older citizens have proved sensitive to the idea that the government might have access to some of the wealth stored in their homes, even if it’s to pay for their healthcare. The illiquidity of houses raises the prospect of retirees having to downsize to avoid tax bills. While this is normal in many places, particularly in the US, it would require a change in mindset here. Put more bluntly, the idea that people should be entitled to have any wealth stored away in property, as opposed to other forms of wealth, untouched by the government is out of date.
Recent purchasers would have to be given property tax credits, so that double-taxation through stamp duty and then the property tax would be avoided. Those who made particular purchases based on stamp duty arrangements that existed at the time may also feel hard done by.
Measurement of house prices would become even more important, as it would have tax implications. In this day and age, though, accurately measuring house prices should not be an arcane task. Measures such as the daft.ie and ESRI/ptsb series are both based on well established hedonic price methods, which could easily be adapted to official Revenue Commissioners data, if these data were made available as they are in most other countries.
An instant extra tax burden is probably not what the economy needs now. Phasing it in gradually over the coming 3/4 years would be advisable as it would allow adjustment to a new system, while also showing medium-term planning on the part of the government.
Nonetheless, there are significant advantages to a property tax:
It gives the government a steady generally acyclical revenue stream and has an automatic stabilizer effect – i.e. the tax burden households face goes down when prices slump and more than likely their confidence slumps too.
There is lots of potential in a property tax to achieve other goals as well as revenue-raising. (Indeed, for the purists, taxes should only be introduced when other aims will be served.) For example, the average of 1% could hide differences, if the government wanted to incentivize, for example, energy efficiency. Houses achieving carbon neutrality or some top level of energy efficiency could be exempt from property tax, or perhaps pay a minimal rate of 0.25%, while homes that incur a significant burden on the rest of society might have to pay signficantly more. (This would require significantly more planning and guidelines for consistent rating than the recent BER scheme.)
Given that we’re talking billions – perhaps even twice as much as the joint report by the main stockbrokers suggested – this should definitely be explored in more detail over the coming months.
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
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
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.
With Davy Stockbrokers predicting a 70% fall in Irish construction activity from its peak over the coming ‘medium term’ (2009-2011 or so), I though it might be timely to review some headline statistics for Ireland’s property overhang.
Recently, I’ve been peddling the idea that between 2004 and 2007, we were building twice as many homes as we needed and building twice as many for 3/4 years implies building half as many as you need for 6/8 years to return to equilibrium. Does that stack up? Or, put another way, if we start in 2002 with Census statistics on the stock of housing, use Dept of Environment statistics for the period 2002-2008 and turn Davy’s figures into ballpark estimates for 2009-2013, how bleak will things look in five years time?
The answer, much to the chagrin of those who loathe two-armed economists, seems to be that it depends – in this instance on what part of the country you’re talking about, but also about what you think is the appropriate long-term need for new houses in this country. If we take 2001 figures (technically March 2002 figures) as our ‘departure from normality’ point, how far off course are we? Between 2002 and 2008, we churned out over half a million properties, off an existing base of just 1.3 million households. Back-of-the-envelope estimates, based on an overview of economists’ figures on this topic, suggests that we should have been building perhaps 300,000 households in that same period. (That’s using an equilibrium figure of 40,000 properties a year, rising temporarily after the accession of new EU member states.) So, enough with all the stats, what’s all this for, you wonder. Well, I was hoping to use all this to answer two key questions:
Where suffered worst from Ireland’s properties building bonanza? Where is housing inventory lying around most?
How long will we have to sit around building hardly anything until we’re back to some semblance of normality in the property market?
Where did we build our extra properties? By the end of 2008, we were about 5 years ahead of schedule – i.e. we’d built 12 years supply in just 7 years. To give a regional flavour, based on insights gleaned from the property overhang per county figures I calculated in December, I split Ireland into three regions – Dublin, Connacht/Ulster and the rest of the country. (The data allow for a full county-by-county analysis, however time constraints and poor formatting in the various external sources has prevented me from threatening another heatmap!) Over the period in question (2002-2008), more houses were built in Connacht/Ulster than there were in Dublin, which has almost twice the population! As a result, in terms of years of “pre-production”, if you will, while Dublin had under 2 years excess supply by end-2008, Connacht/Ulster had almost 8 years. Once more emphasis: builders managed to produce 15 years output in Connacht/Ulster in just 7 years.
How long will we have to sit around building nothing? It’s all very well for someone to come along after the fact and say “You shouldn’t have done that”. What’s more interesting is to shed some light on where the adjustment will come first and where it will be hardest. One option would be just to close up our construction sector for a few years until inventory shifts sufficiently and prices start to rise. Practically, of course output doesn’t and shouldn’t collapse to zero and, as per Davy’s figures, will be in the range of 10,000 to 25,000 over the coming 5 years.
Therefore, I’ve assumed output of 20k in 2009 (still slowing down), 10k in 2010 (bottom of the market) and then a simplistic 5k increase in output every year after that, rising to 25k in 2013. Let’s call this the ‘post-Section 23′ scenario. This is contrasted with a ’20:20 foresight’ scenario where steady-state output in construction remains 40,000, apart from a minor blip of 35,000 in 2009 due to global economic circumstances. In both scenarios, new houses are allocated according to a region based on its Census weight – crucially, and we can relax this later, even in our post-Section 23 world, output resumes in Connacht/Ulster, not at the distorted rates we saw but in proportion to its size. The result of all this is the chart below. The figures show the excess of properties as a percentage of the total property stock in each of the three regions.
Ireland's excess properties, % of total properties, by region, 2003-2013f
The results are pretty clear:
Even with some major internal restructuring of the construction industry (i.e. rebalancing output of houses according to a region’s weight in the economy), Connacht and Ulster will still have a significant property overhang, more than 10% by 2013 – and that itself based on a drastic 70% contraction in building activity from peak levels.
For most of the country – and indeed the country on average – the overhang will have halved by 2013 but will still be in the region of 5/6%.
In Dublin, shortages in housing may emerge as quickly as 2012.
Objections to the above might include one along the following lines: construction will not only contract 70% but also no-one will be building in Connacht/Ulster for years to come so even the rebalancing of output described above is not an accurate forecast. In that case, the overhang will just take the full 8 years from 2008. Section 23 and the property boom will have taken construction jobs from 2009-2015 and left them in 2002-2008 – a sort of integenerational outsourcing.
Another objection is that the optimistic (if 2012 is optimistic) scenario painted for Dublin hinges on that long-term need of 40,000 units a year (which translates into about 12,000 new units in Dublin annually, based on its Census weight). Significant and persistent net outward migration from Dublin from 2009 on – which incidentally is why I believe that Dublin Bus, so clearly an ‘inferior good’ in the economist’s sense of the word, is losing money when incomes fall – might mean that the demand for housing in the period 2009-2013 may fall to 20,000. Replacing 40,000 with 20,000, from 2009 on suggests that the average percentage overhang for the country stays stuck at 10% and Dublin – while still much lower – remains stuck at 3-4%.
In sum, we are where we are. We’ve more than enough houses everywhere in the country and plenty of houses in places where we won’t need them for another 10 years or so. Therefore, it would be wise for the Government to take this crisi-tunity, as Homer Simpson would say, to harness both supply and demand sides of the market.
On supply, it should focus the efforts of the much-trimmed residential construction industry, when that sector starts to medium-term plan in 2010/2011, on Dublin and other areas around the country most likely to show a shortage of property this side of 2015.
On demand, the Government should attempt to deliver balanced regional development, taking property overhang as an opportunity for affordable housing to create new centres of employment. Taking this to its most logical conclusion, firms outsource because they want to free up resources to specialize on what they’re good at. Therefore, we must adopt a mentality along the following lines: “Let’s take this opportunity to treat our property boom as intergenerational outsourcing, which has freed us up to focus on what we’re good at.” (Just don’t say all we’re good at is construction!)
Watching Monday’s Questions & Answers, I became increasingly baffled as to how poorly understood the gap between public sector and private sector pay in Ireland actually is. I conducted a mini-straw poll, through the various media of living room chat, email and Twitter. That poll made me realise that while I had been labouring under the presumption that despite all the stats we have on wages across sectors, those stats were having no impact, others were labouring under the presumption that the debate had to be kept at a general level because we had no statistics on the topic.
The guts of a decade ago, I undertook some research for Prof. Frances Ruane on the original benchmarking deal. What we found at the time was that there was no gap emerging between public and private sector wages, or if the gap was there at all, it was in favour of public servants. For those interested in more on that 2001 perspective, I’ve embedded a version from Scribd at the very bottom of the post.
Given the way this week is going, with public sector unions somewhere between agog and apoplectic at the idea of having their wages reduced, and given that no-one in public discourse (if Q&A is representative) is quoting these figures, I thought it might be no harm to see if I could do up what we in the business call “a one-slider” that might make them understand the decision a little better.
First, a general comment about public sector pay cuts. This can’t possibly be that much of a surprise to anyone in the public sector. After all, this is what they signed up to in 2001, with benchmarking. Benchmarking may have been an incredibly expensive way to do it – costing the economy €1bn+ every year and counting – but it did establish a principle in public sector wages in Ireland. That principle is that trends in public sector wages must mirror those in the private sector. It’s incredibly cheeky of those happy to have the principle applied in the good times to argue that they shouldn’t have to ‘bear the brunt’ of having the same principle applied in the bad times.
Now for the one-slider!
Graph of public and private sector wages, Ireland, 1998-2008
And in true consultant style, three key points from the above graph:
Lest we forget the most obvious, in every year of the series, public sector workers were paid more per year than their private sector counterparts*. 30% more on average! (There may be perfectly legitimate reasons for this, for example average experience/years worked may be higher, responsibilities may be greater… but a priori, who knows?)
As you can see, the gap has widened, not narrowed over the decade. In fact, in euro terms, it widened 8 years out of 10! And after the two years of greater private sector increases (prizes for eyesight if you can spot them on the graph), there were huge increases in public sector pay the following year.
Public sector pay is at least five years ahead of private sector pay. What public servants earned in 2003 took their private sector counterparts until 2008 to earn (in fact, they’re not even there yet, another €500 or so to go!).
With the Live Register now rocketing towards 400,000 and private sector wages now stagnant, bonuses disappearing, total earnings in the private sector are falling. Therefore, according to the principle of benchmarking, so must public sector wages. As they are paid €50,000 on average, compared to average wages of less than €38,000 in the private sector, this won’t be the biggest economic calamity to befall Ireland this year. Now, can we please incorporate this knowledge into our social dialogue?
[scribd id=11635058 key=key-2809dv8hrkl94xxmtc5r]
* Public sector includes public administration and education, but excludes health. No data there for some reason. Private sector includes all sector apart from agriculture (again no data). Some other methodological notes: I have had to assume Q4 figures for 2008 equal to Q3 in some instances or just take the average for the first three quarters, as Q4 data are not yet out. Construction figures only start in 2004, while manufacturing/industrial wages end in 2007, so I have had to use rates of change for the remaining sectors in those time periods, but the level of wages is determined by the full sample of private non-agricultural wages.
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
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!
Following on from my recent post about Web2.0, hubdub and guessing Irish unemployment, I think it’s only right that I turn this future prediction market technology on myself. Well, on the Daft Report at any rate.
Those who get it right will get naught but some more Hubdub dollars, but hopefully that will suffice. Well, that and the knowledge of being right, and perhaps some real dollars, in the form of a cheaper rent, if you’re a tenant bargaining with your landlord – assuming of course rents fall. (As I write this, the Hubdub market currently gives a 5% chance to rents falling less than 6% or rising, so some of that 5% includes the theoretical, at this stage, outcome that rents will go up.)
There is of course a serious side to all this (careful, blogosphere, here comes the science bit). If the market matures enough, it will be interesting to see how correct it is, compared to the actual outcome. Consistently accurate markets, across a whole range of these hubdub thingies, would say something to economists and policymakers, for example in Ireland, in light of the social partnership talks about public sector pay cuts (e.g. have public sector workers already cut their expenditure in anticipation of a cut?)
Most importantly, though, have fun! We need all the fun from markets we can get these days.
I had the rather pleasant task today of going through a range of Web 2.0 / social networking tools and establishing the potential in their application to primary research. Some key things that the new generation of web tools can give include:
Using something like digg or scribd to find key themes and recent developments in a topic, and – because you know who’s posted and who’s posted most – experts on a particular topic
Using something like basecamp or dimdim to project manage flexibly, particularly when teams are non-traditional, i.e. they are globally dispersed, working from home, volunteer-based, etc.
Using something like LinkedIn or indeed WordPress to access groups of experts on a particular topic and start a discussion
Using something like Manyeyes (which I’ve done in a few posts) or wordle (which I may have done in one too many posts last year!) to come up with new visualizations and ways of thinking about data
Many or most of these I was already somewhat familiar with. Indeed, twitter is increasingly one of my main sources for accessing news, thanks to RTE’s twitter services, and accessing expertise, as a surprising number of economists are on it. (I may also use it to keep tabs on Stephen Fry and Jonathan Ross, but that’s probably for another post!)
Anyway, what I was not aware of, or rather perhaps only vaguely aware of, was the plethora of wisdom-of-the-crowd prediction markets tools out there. By way of example, I’ve set up one at hubdub, that hopefully proves my point:
