Irish Residential Property Price Index for June is out today. Headlines are burning hot with
- 12.5 hike in prices nationwide (y/y);
- June m/m rise of 2.9% - faster than 2.3% in May
- Dublin property prices up 3.3% m/m and 23.9% y/y
- Dublin House prices up 3.1% m/m and 24.4% y/y
There is no avoiding the talk about a 'new bubble'.
In the past, I clearly said that in my view:
- Current levels of prices are not signalling bubble emergence in Dublin
- Rates of increases in Dublin prices are concerning, but levels are yet to break away from the national historical averages
- Trend-wise, we are way below the levels of Dublin prices consistent with normal long-term behaviour in the series.
Here are updated charts on long-term trends.
First, looking at annual series and applying two trend assumptions: actual inflation and ECB target (long-run inflation). By both metrics, we are still below (using 3mo MA through June 2014 as 2014 figure) equilibrium, but rate of convergence is accelerating:
On monthly basis, here are historical series, linking ESRI and CSO data sets:
As above clearly shows, Q2 2014 levels of prices in Dublin are barely above 2000-2002 average.
So the dynamics can signal a bit of an exuberance on the market demand side, but levels are still very much conservative compared to longer-term trends.