Dublin property prices are falling again


Does this not look like equilibrium? Ignoring external influences…


Does the housing market have equilibria? I don’t know, I’m just wondering out loud. Morgan Kelly certainly seemed to be of the opinion that boom / bust cycles were the norm rather than the exception. One reason to suspect that a stable balance between supply and demand could be tricky is the effect on investors when capital gains dry up.


Agreed, like a pendulum at the top of the arc. How many degrees that arc describes is what we want to limit.


I think in the last boom/bust we had speculation on increasing house prices - there was a naive view that they had to keep rising. Speculation is confidence based - once the tide started to turn everyone ran back to the beach and prices tanked. This time around there have been lessons learned - professional speculators got in and out very quickly. Once price increases slowed they got out . Professional outfits (like REITs) who have invested in property for rental purposes will not be as concerned about the value of the underlying asset (unless they are leveraged or using the value of the asset to obtain leverage) but their more naive investors might be.

On that basis I don’t think there will be a rush to the exit and a consequent massive price crash. I do think there could be a price fall due to affordability if we have either an economic downturn or an increase in interest rates. The current 330k median price for a house in Dublin is (just) sustainable in the current (rosy) economic climate - all the indicators are that this will come to an end soon. The biggest impact of a downturn will be on rents - people are a lot more mobile than apartments. If you haven’t got a job or your hours are cut you won’t be able to afford to live in Dublin and you will be off to where the jobs are or at least where it’s cheap to live. Just look at all the young people milling around town - none of them (Irish or foreign) have roots so deep here that they couldn’t up and leave. House prices will probably slip downwards and sales will dry up. The MyHome report shows how little activity there is above somewhere in the 4-500k range. There are very few people coming into the market that can fund anything above that. Trying to sell an ‘ordinary’ house (that got 1m in the boom) for anything over 500k is very difficult - and that’s where the crash has already happened.


There’s an unexpected uptick in Dublin prices in this morning’s release of the CSO Residential Property Price Index. It’s a tiny increase (and the latest two months’ figures are always provisional), but it had been falling for seven months in a row.


CSO May 2019


Dublin - houses
Peak: Oct 2018
May 2019: +0.7% increase and +0.4% annual
As of May 2019 prices have fallen back -2.6%

Dublin - apartments
Peak: Sep 2018
May 2019: +0.4% increase and +0.8% annual
As of May 2019 prices have fallen back -2.2%

Dublin - all residential
Peak: Oct 2018
May 2019: 0.8% change and +0.6% annual
As of May 2019 prices have fallen back -2.2%