Friday, April 26, 2013

26/4/2013: Where's that 'recovery' thingy? Irish Residential Property Prices, March 2013

Various Irish ministers and Government 'analysts' have been on the media in recent months extolling the virtues of 'recovery'. In a society still obsessed with property prices, one of the key tenets of the 'recovery is upon us' proposition is the view that Irish property prices are rising once again usually followed by the claims that hordes of 'foreign investors' and 'domestic cash buyers' are fighting to get their hands on prized Irish properties.

Of course, a major point of internal contradiction for all these 'green jersey' claims is that if property prices are rising, then the cost of doing business in Ireland should be rising as well, just as the 'analysts' are claiming that it is falling, especially when it comes to rents and property costs. You see, one can't really have both: deflation in costs is incompatible with rising prices on assets underlying these costs.

Meanwhile, as usual with the Government's exhortations, reality has been having a mind of its own.

Latest numbers from CSO, covering the Residential Property Price Index for Ireland, show exactly how out of touch the folks peddling are.

All properties RPPI fell 3.03% y/y in March and this accelerated 2.57% y/y fall recorded in February. M/m property prices were down 0.47%, which is better than 1.59% m/m drop in February, but marks 4th consecutive month of monthly prices drops. Last time Irish residential property prices were up was in November 2012 and since then we have seen a cumulative decline in prices of 3.03%.

6mo cumulative decline in RPPI stands at 2.58% against previous 6mo cumulative drop of 1.23% and against average m/m drop over the last 6 months of 0.43%.

In fact, All Properties index has fallen to an all-time low in March 2013 despite numerous proclamations of recovery by the Government. Property prices are now down 50.88% on their peak and are statistically significantly below crisis period average.

The distance to 6mo MA line is now widening, which suggests that we might be in a medium-term secular change in trend downward from the previous trend that was just flat. As a note of caution: this remains to be confirmed over time.

House prices also hit an all-time low in March 2013 with index sliding 3.05% y/y, against 2.90% decline recorded in February, and 0.3% down on m/m basis. 3mo cumulated change is now -3.04%, 6mo cumulated change is at -2.77% and previous 6mo cumulated change was -1.47% so things are getting worse faster. House prices are now down 49.39% on peak.

Apartments prices have decline 1.44% in March on y/y basis, having posted 6.4% rise y/y in February. Monthly change in Apartments prices was -6.99%. 3mo cumulated change in prices is still +2.13%, with 6mo cumulated change of +2.13% down from previous 6mo cumulated change at +9.81%. Relative to peak, Apartments prices are running down 61.34% and relative to all-time low they are up just 4.81%.

Dublin prices were most often cited as showing significant gains in the current 'recovery'. These are still up 1.38% y/y in march, but they were up 2.95% y/y in February. Monthly drop in Dublin residential properties was -0.84% m/m and this marks second consecutive m/m drop. 3mo cumulated change in prices was -0.68% against -1.17% in previous 3mo period, 6mo cumulated change is now at +0.17% against +3.49% increase on previous 6mo period. Dublin prices are now down 56.28% on peak and are up 2.62% on absolute low.

In short, to conclude:

  1. As I have maintained throughout recent months, Irish residential property prices are trending flat overall.
  2. Flat trend is now being challenged to the downside, with some indications that it is turning to negative, though this requires more data to make any conclusion firm.
  3. Prices are seeking some catalyst in the market and despite all the efforts by the Government to 'talk the talk' on recovery, there are no indications from the property market that such 'recovery' is anywhere in sight.
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