Thursday, February 28, 2013

28/2/2013: Boring, Boring Property Prices in January


When one is bored, truly deeply bored, it is hard to muster much strength to go through the twists and turns of the data. And I am bored, folks. Irish property prices data, released by CSO today, is simply equivalent to watching a fish flopping on hot asphalt - it is simply, clearly, obviously, patently... not going anywhere.

That is the story with the stats from Ireland nowadays - the flatline economy, punctuated by the occasional convulsion up or down.

Alas, to stay current we simply have to go through the numbers, don't we?

Let's first do a chart. Annual series for 2012 are finalised and were revised slightly down on the aggregate index compared to the previous release:


The chart clearly shows that despite all the talk about 'bottoming out' house prices, and 'buyers throwing deposits on unfinished homes' is a quasi-2006 frenzy, property prices in Ireland fell over the full year 2012.

Recall the prediction by some economists that property prices are likely to stabilise around -60% mark on peak? I made similar claim, but referencing in the medium term Dublin and larger urban areas, while stating that nationwide prices will be slower to react due to rural and smaller towns' property markets being effectively inactive. Guess what? Dublin prices were down 56.3% on peak in 2012. Not exactly that badly off the mark. Apartments prices - down 61.1% on peak. Exceeding the mark. Nationwide, properties were down 49.5% on peak, still some room to go, but in my view, we are still heading in the direction of 60% decline.

Now, onto monthly series.

Nationwide Property Prices: 

  • All properties RPPI declined from 65.8 in December 2012 to 65.4 in January 2013 (down 0.61% m/m) and is down 3.25% y/y. 
  • Despite all the 'stabilisation claims', overall RPPI has not posted a single month y/y increase since January 2008. 
  • The 'good news' is that RPPI rate of decline (in y/y terms) has slowed down for the 9th consecutive month in January 2013.
  • 3mo MA has been static now over the last 3 months at 65.77, which simply means that half of the gains that were made from the historical trough of 64.8 in June 2012 to the local peak of 66.1 attained in November 2012 were erased when the index fell to 65.8 in December. January rise is a tiny correction back up.
  • Let's put this differently. January 2012 index returned us back exactly to the level of prices recorded in April 2012 and then repeated in October 2012. 
  • The market is... lifeless. Irony has it: 3mo cumulated gains through December 2012 were exactly zero. 3mo cumulated change in the index through January 2012 is exactly zero.
  • 6mo cumulative gains are more 'impressive' at +0.77%.
  • But put this into perspective: this rate of 'growth' implies annualised rate of +0.878%. At this rate of annual expansion, the next time we shall see 2007 peak level prices for properties, expressed in nominal terms, will be 2092. 
Dublin:
  • Prices in Dublin corrected slightly up in January to 59.5 from 59.2 in December 2012. Latest reading is still below 60.0 local peak recorded in November 2012, so the correction is so far very much partial.
  • Y/y prices are now firmer at +2.06% in January, having posted -2.47% decline in December. January marked the first month that we had y/y increases in prices since November 2007.
  • The rate of price increase in January in y/y terms, however, is basically solely correcting for inflation, which means that for anyone with a mortgage payable today, property 'wealth' is continuing to drop in real terms. Obviously, that is too far advanced of an analysis for the Government and its cheerleaders who think 2.06% increase in just one month over 62 months is a firm sign of a 'turnaround' or worse, 'recovery'.
Instead of boring you with the discussion of detailed stats on dynamics, here are the main charts:



 
All of the above show basic reality of an L-shaped 'recovery' we have been having to-date. May be, one might hope or one might dread, the prices will move up from here in a more robust fashion. Reality is - so far, they are not... When that reality changes, I will let you know.


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