16/9/2014: More of a Risk, Less of a Bubble: Irish Property Prices in Q1 2014

An interesting BIS paper on House Prices data across a number of advanced economies (http://www.bis.org/publ/qtrpdf/r_qt1409h.htm). A key chart:

Data is through Q1 2014 and is based on the aggregate of 8 data sets for Ireland. It is worth noting that data is for Ireland overall, not Dublin.

In the nutshell, in Q1 2014 Irish property prices were still at the lower end in terms of price/rent ratio and price/income ratio.

An interesting contrast to other peripheral and advanced economies in terms of dynamics:
"Year-on-year residential property prices, deflated by CPI, rose by 9.5% in the United States and 6% in the United Kingdom. Real house prices also grew, by 7% in Canada, 7.7% in Australia and 2.2% in Switzerland, three countries that were less affected by the crisis, as well as in some countries that were severely affected by the crisis, such as Ireland (+7.2%) and Iceland (+6.4%).  Real price growth remained in negative territory in Japan (–2.6%) and was generally weak or negative in continental Europe. Prices rose in Germany (+1.2%) and the Nordic countries (+1.7% in Denmark and +4.8% in Sweden), but continued to fall in the euro area’s southern periphery (Italy, –5%; Spain, –3.8%; Portugal, –1.2%; and Greece, –6%). "

So as I noted before, two points of concern and two points of solace:

• Dynamics of prices, not levels, are signalling serious problems in the markets;
• Dublin is the core driving factor for this with the rest of the country barely showing much of an improvement;
• Levels of prices remain benign in relation to incomes and to rents, especially outside of Dublin;
• Compared to other peripherals, we are witnessing much faster recovery supported by significant past falls in prices relative to income (note similar levels of prices in Iceland, although prices recovery and dynamics are more concerning there than in Ireland).