Daft Report Q4 2019

“House prices are falling in two thirds of Irish micro-markets”. Thus says Daft Q4 report, now out. Ronan Lyons says: “slightly falling sale prices reflects greater affordability and, if housebuilders are becoming more efficient, greater viability”. The IT reports on it here:

Main infographic:

Ronan Lyons makes an interesting claim In this report.

What is perhaps remarkable is that since 2012, the yield on housing has been remarkably stable, at between 6% and 6.5%.

It’s true that yields now are around 6% but that follows a period of rising rents and stable, or even falling, prices.

I think the disconnect between rent and property prices which characterised the bubble years is still with us but it has been disguised by rising rents in recent years.

House prices in Dublin jumped 50% in 2013 - 2015 while rents were largely stable. Then rents started climbing while prices have stabilised apart from a jump of around 15% in 2017.

In Dublin at least the yield on housing has not been stable. I think rents will continue to rise while prices stagnate so yields will increase.

Ronan Lyons predicting that developers will hold back supply now that prices are dropping

Ronan Lyons, economist at Trinity College, and author of the Daft.ie report, said the fall in prices had been caused by an increase in the construction of three and four-bed owner-occupier homes now coming on the market, in particular in the Greater Dublin Area.

Over the next year-and-a-half property developers will try to get a better understanding of the market to ensure that it is not “flooded” with homes.

“If developers release too many homes at once, prices will go down. Over the next 12 to 18 months developers will be trying to figure out the market and not flood it,” he said.

Developers now fear ‘flooding’ market as house prices in decline

Something really wrong with the marketplace if a learned commentator can be suggesting that developers will act or be able to act in concert like that…

A rational developer should be looking at their costs of holding land and financing development in the future versus what they can get now. Maybe the government should be watching this closely and increasing the costs of holding development land.

Some links to the implementation of the vacant site levy…