Monday, August 29, 2011

29/08/2011: Residential Property Price Index: July 2011

Residential Property Price Index for Ireland for July 2011 was released earlier today by the CSO, showing continued deterioration in property prices across the board.

Per CSO: "In the year to July, residential property prices at a national level, fell by 12.5%. This
compares with an annual rate of decline of 12.9% in June and a decline of 12% recorded in the twelve months to July 2010." Chart below illustrates:
Residential property prices fell by 0.8% in the month of July. This compares with a
decline of 2.1% recorded in June and a decline of 1.3% in July of last year. To give a bit more granularity to the data:
  • RPPRI now stands at 75.1, down from 75.7 in June, and 3mo MA is 76.03, against June 3mo MA of 77.07.
  • Relative to peak property prices have no declined 42.45% against June to-peak decline of 42%.
Using 7 months of 2011 data, we can forecast expected declines in the index for 2011 as a whole:
Please note: this is a crude forecast. The result suggests that prices can decline to 75.3% of 2005 levels by the end of 2011 for all properties, with corresponding declines in House prices to 78.41%, Apartments to 57.47% and Dublin prices declining to 69.02%.

Let us make another set of important calculations. Recall that section 73 of the NAMA Act 2009 established the definition of the cut-off date for NAMA valuations. This date was later set at 30 November 2009. NAMA then applied an LTEV uplift on properties valued to that date. According to NAMA own business projections, the agency will require 10% increase in property values referenced to LTEV and November 30th 2009 cut-0ff-date to break even. In addition, NAMA claimed that its valuations are based on the consulting report they received from London Economics that timed property markets bottoming out to the latest Q1 2010.

Well, since the cut-off date, Irish residential property has now fallen a whooping 20.02% and relative to the end of Q1 2010, when NAMA expected the bottoming of the property cycle, the property values are down 16.28%. Ooops...

Back to the data:
  • Index for House prices stood at 78.1 in July, down from 78.6 in June (-0.64% mom) and down 12.25% yoy
  • House prices 3mo average index is now 79.03, down from 80.1 a month ago.
  • House prices are down 40.83% to peak
  • Apartments continued falling at precipitous rates, with Price Index for Apartments down to 57.6 in July from 59.4 in June. A decline of 3.03% mom and 15.67% yoy.
  • Apartments prices 3mo MA is now at 59, down from 59.93 in June.
  • Apartments prices are down 52.59% to the peak.

Having posted a bizarre increase from 70.5 in April to 70.8 in May, Dublin prices have fallen off the small cliff in June settling at the index reading of 69.1. July data shows Dublin prices flat at 69.1. This means that 3mo MA is now at 69.67, down from 70.13 in June. Relative to peak, prices in Dublin are down 48.62%. Year on year, July Dublin prices are down 11.86%, an improvement on annualized rate of decline of 12.64% in June, but worse than yoy change attained in May (-11.5%).

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