04/07/2011: Irish property prices - daft.ie report

My comment and rather back-of-the-envelope outlook for Irish property markets is available with daft.ie report - link here. Note that the prediction concerning rents-prices feedback is based on my earlier analysis published here - see the last chart.

Strangely, at least in one instance my opening paragraphs were identified by some commentators as being a 'political statement'. To all who know my work, this should sound like a mistake for two reasons:

1. I have never taken partisan political positions. While I do hold strong policy views, these are not aligned with any political party or movement. I have consistently provided advice to and public engagement with any political party or movement that asked for such. During the last election, as in the previous elections, I did not support any particular party, although I did support / help a number of individual candidates whose views span left and right of the political spectrum and with whose views I was not necessarily in full agreement.
   
2. The entire opinion piece is based on my understanding of economic facts. I have spoken on many occasions about the adverse effects of increased taxation on investment and household spending. I have been vocal about the mirage of 'foreign investors flocking to Ireland' stories being pulled out of thin air by our real estate journalists. Over a number of years, I have been critical of the state policy of promoting - via pricing systems and lack of regulatory independence - inflation in state-controlled services. Nothing political here.

25/06/2011: Daft.ie v CSO RPPI - property prices in Ireland

Courtesy of the CSO RPPI - published for the first time this year - Ireland now has two series of property prices data to compare - Daft.ie asking prices and rents, and CSO's RPPI. Since Daft.ie pre-dates CSO dataset and since Daft.ie is a private undertaking with no access to the resources of the state in paying for and collecting data, it might be of interest to see how the two series compare.

This is exactly the exercise I performed.

Let's take a look at the CSO RPPI (an index) and Daft.ie (prices):
So a strong relation in terms of asking prices and RPPI - some 97% of variation explained.

Similarly, a very strong relationship between RPPI and Daft.ie reported asking rents:
Note that there are serious lags in the asking prices and rents relative to what RPPI is measuring, but overall, Daft.ie seems to be doing as good of a job of capturing prices over the long term as CSO data.

It is worth noting that when I converted Daft.ie prices to an index comparable directly to CSO RPPI, the results remained the same. So well done to Daft.ie gang - they really managed to run (and continue running) a superb database.

Another interesting issue is the relationship between property prices and rents:
Really, self-explanatory.

Economics 25/05/2010: Daft rental report

Update below: stabilization or not?

Daft rental report is out today. Some interesting reading of the numbers. As predicted by me on the foot of January data - when the prevailing media song was about 'stabilizing' rental markets - rents are continuing their Southward trajectory.

Relative to peak rent:
So no relief in sight. Remember, in this country we call things 'stabilizing' when the rate of fall slows down... Pardon my foreign language skills, but I'd say things are stabilizing when we reach the bottom. In other words, when the numbers above stop increasing in absolute value.

Let me reproduce for you the seasonality chart I did back on the foot of January data:
You can see what I meant by January rally back then, and you can see that things have fizzled out since then. When one realizes that since 2008 we virtually had no new units coming into the rental market, this figure looks even more depressing. We are experiencing a real decline in demand as jobless families are dropping out not out of the property market, but out of the rental market! Emigration is, no doubt, also playing its part. All of which means that those first time buyers... well, are rapidly becoming first time lodgers in their moms homes.

What about the dynamics going forward?

Well, neither levels of rents, nor rates of change in rents are showing any stabilization. Both series are trending in the negative territory, suggesting that pressure on rents might remain, adjusting for seasonality, for some time. That said, positive monthly territory for now remain in sight, both in moving average terms and in rate of change terms. So expect shallow moves, with a risk to some downside.

Update: Since earlier today, there have been some debates going on as to whether Daft data shows any stabilization in rents. As I asserted earlier, relative to peak, monthly march downward continues (see table above) uninterrupted (once seasonality is factored in for January) and in absolute terms for all 4 months. But what about year on year changes? Table below shows the results:
So per annual changes, 2 conclusions are warranted:

• While the rate of decline has moderated across 2010 relative to 2009, the declines continued in double digits in February, March and April. Only in March and April have the declines been lower than a year ago.
• Probability wise, this was to be expected given seasonal variations, with likelihood of more positive moves in March and April being twice higher than in February.

On the net, I do not see any stabilization so far. Oh, and just in case you wondered - Daft data also shows uptick in properties available for rent... Hmmm...