Thursday, September 25, 2014

25/9/2014: Irish Property Prices: Scary Dynamics in Dublin, Relative Slumber Elsewhere

Latest Residential Property Prices Index for August 2014 continues to point to the same trends and risks as in previous months.

Firstly, historical level of current price levels: Measured in quarterly terms, Q3 2014 data through August 2014 points to Dublin index reading of 77.95 against 72 in Q2 2014 which brings index to the levels last seen in Q3 2010.

As dramatic as the increase from crisis period trough might appear, the series still well below where long-term activity should be, as seen in the chart below:

However, rate of price increases remains of concern in Dublin market. In August 2014, residential property prices across the nation rose 14.93% y/y, the fastest y/y growth rate since October 2006. Nationally, house prices rose 14.61% y/y in August, marking the fastest rate of increase since March 2007. Apartments prices rose 24% y/y in August 2014, marking the fastest rate of increase on record and beating previous historical high attained in July 2014.

All of this activity was down to Dublin price hikes. Excluding Dublin, property prices rose more modest 5.63% y/y in August. House prices rose 5.80% once Dublin is excluded.

Meanwhile, Dublin property prices were up 25.08% y/y in August, marking thirteenth consecutive month of double-digit y/y inflation. Dublin house prices rose 24.7% y/y in August 2014, also marking thirteenth consecutive month of double-digit y/y prices growth. Dublin apartments posted price growth of 32.63% y/y in August, for the fourteenth consecutive month of double-digit expansion.

Compare the above chart for Dublin with the same for ex-Dublin:

Over the last 24 months, cumulated growth in national residential property prices was 16.02%, with house prices rising cumulatively by 15.34% and apartments prices up 32.2%. Outside Dublin, all properties prices were up more modest 2.89% in cumulative terms over the last 24 months and house prices were up 3.11%. In Dublin, residential property prices were up 38.39% over the last 24 months, which is 13.3 times faster than ex-Dublin. Dublin house prices grew 12.2 times faster than ex-Dublin house prices, at a 24 months cumulative rate of 37.83%. Dublin apartments prices rose 46.09% in 24 months through August 2014.

So as before: there are very worrying signs in price increases in Dublin, albeit levels of prices still remain subdued compared to both historical trend and inflation-driven trend. In other words, be scared of the speed of price increases, but not of the levels of prices so far.

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