Another lengthy and tedious post. The objective here is to look at the affect credit has on property prices.
The Central Bank published lending figures up to May 2012 see: centralbank.ie/polstats/stat … nking.aspx.
These are absolute numbers and do not adjust the value of the loan amount for inflation or deflation.
In summary, the relevant information from Table A.5.1 - Outstanding is:
Month A B C D E F G H I J K L M
Jan 2003 56,949 43,837 929 5,301 37,607 10,011 3,989 3,147 2,875 3,101 422 1,087 1,593
Feb 2003 58,113 44,615 936 5,435 38,244 10,511 4,292 3,302 2,918 2,986 387 1,116 1,483
Mar 2003 58,962 45,527 928 5,596 39,002 10,520 3,523 3,800 3,197 2,915 341 1,135 1,438
Apr 2003 59,290 45,634 738 5,713 39,183 10,656 3,504 4,014 3,138 2,999 237 1,294 1,468
May 2003 60,273 46,570 740 5,875 39,956 10,735 3,466 4,128 3,141 2,967 232 1,252 1,483
Jun 2003 60,617 47,185 699 5,639 40,847 10,623 3,302 4,290 3,032 2,809 196 1,263 1,350
Jul 2003 62,157 48,410 729 5,842 41,840 10,822 3,377 4,342 3,102 2,925 189 1,212 1,524
Aug 2003 63,107 49,513 771 6,019 42,723 10,883 3,385 4,385 3,113 2,711 162 986 1,563
Sep 2003 64,535 50,924 836 6,143 43,945 11,032 3,499 4,410 3,124 2,579 172 947 1,459
Oct 2003 65,793 52,069 882 6,279 44,908 11,100 3,446 4,473 3,181 2,624 173 1,007 1,444
Nov 2003 67,450 53,381 919 6,630 45,833 11,613 3,622 4,548 3,443 2,457 136 899 1,421
Dec 2003 69,286 54,992 1,008 2,462 51,522 11,876 3,593 4,504 3,779 2,417 143 940 1,335
Jan 2004 70,513 56,020 585 1,182 54,254 11,902 3,635 4,444 3,823 2,591 478 757 1,355
Feb 2004 71,742 56,942 579 1,342 55,021 12,197 3,738 4,764 3,695 2,603 434 730 1,438
Mar 2004 73,238 58,246 612 1,295 56,339 12,428 3,748 4,741 3,938 2,564 356 822 1,386
Apr 2004 74,879 59,605 651 1,269 57,685 12,604 3,719 4,815 4,070 2,669 379 864 1,426
May 2004 76,750 60,898 701 1,228 58,968 12,912 3,840 4,912 4,160 2,940 367 914 1,659
Jun 2004 78,678 62,268 749 1,186 60,333 13,107 3,916 5,005 4,186 3,304 474 1,005 1,824
Jul 2004 82,715 66,126 799 1,238 64,089 13,233 3,993 4,961 4,280 3,356 460 947 1,949
Aug 2004 84,249 67,416 794 1,251 65,370 13,329 3,993 5,004 4,332 3,505 512 951 2,042
Sep 2004 86,127 69,065 650 1,235 67,180 13,452 4,066 5,007 4,379 3,610 526 1,009 2,074
Oct 2004 87,843 70,491 668 1,249 68,573 13,700 4,177 5,051 4,472 3,652 558 1,091 2,003
Nov 2004 89,894 72,094 676 1,236 70,181 14,067 4,382 5,139 4,546 3,733 596 1,087 2,050
Dec 2004 91,671 73,706 787 1,259 71,660 14,143 4,136 5,226 4,782 3,821 621 1,135 2,066
Jan 2005 93,410 74,718 790 901 73,027 14,630 4,474 5,268 4,888 4,063 755 1,276 2,031
Feb 2005 94,759 75,820 723 944 74,152 14,717 4,450 5,378 4,889 4,223 822 1,248 2,153
Mar 2005 96,615 77,216 690 1,013 75,514 15,103 4,598 5,458 5,047 4,296 842 1,307 2,147
Apr 2005 98,832 78,857 702 1,030 77,125 15,471 4,545 5,560 5,366 4,504 980 1,339 2,185
May 2005 101,457 80,528 705 1,050 78,773 16,117 5,086 5,700 5,331 4,812 1,099 1,454 2,259
Jun 2005 103,587 82,645 752 1,089 80,804 16,001 4,809 5,812 5,380 4,941 1,092 1,512 2,337
Jul 2005 106,099 84,466 776 1,123 82,566 16,572 4,974 6,090 5,508 5,061 1,111 1,563 2,388
Aug 2005 108,487 86,525 791 1,157 84,578 16,672 4,967 6,057 5,648 5,289 1,118 1,741 2,430
Sep 2005 111,182 88,543 792 1,118 86,634 17,055 5,123 6,120 5,812 5,584 1,143 2,007 2,434
Oct 2005 113,570 90,454 759 1,254 88,442 17,513 5,433 6,188 5,892 5,603 1,104 1,961 2,538
Nov 2005 114,667 91,141 801 1,285 89,055 17,906 5,609 6,239 6,057 5,621 1,152 1,896 2,573
Dec 2005 117,137 94,718 856 1,536 92,326 17,152 5,429 6,102 5,622 5,267 1,135 1,696 2,436
Jan 2006 119,180 96,284 901 1,584 93,799 17,487 5,489 6,220 5,777 5,409 1,138 1,681 2,590
Feb 2006 122,275 98,385 929 1,760 95,696 18,182 5,320 7,332 5,531 5,707 1,227 1,874 2,606
Mar 2006 122,244 100,554 993 1,810 97,751 16,218 5,280 5,764 5,174 5,472 1,234 1,949 2,290
Apr 2006 124,653 102,461 977 1,844 99,640 16,777 5,578 5,883 5,316 5,416 1,198 1,952 2,266
May 2006 127,563 104,676 981 1,857 101,839 17,301 5,946 6,057 5,298 5,586 1,278 1,945 2,364
Jun 2006 128,639 104,897 1,112 1,974 101,810 18,042 6,154 6,365 5,523 5,701 1,290 2,024 2,387
Jul 2006 130,387 105,920 1,083 2,081 102,756 18,555 6,376 6,514 5,665 5,912 1,294 2,234 2,384
Aug 2006 130,966 106,501 1,101 2,065 103,335 18,676 6,216 6,588 5,872 5,788 1,382 2,202 2,204
Sep 2006 133,411 108,580 1,204 2,263 105,114 19,255 6,607 6,671 5,977 5,576 1,370 2,109 2,097
Oct 2006 136,070 110,650 1,208 2,388 107,055 19,556 6,746 6,765 6,045 5,863 1,500 2,174 2,190
Nov 2006 138,070 112,899 1,421 2,162 109,315 19,143 6,637 6,585 5,921 6,028 1,553 2,232 2,243
Dec 2006 137,269 111,303 1,473 2,202 107,629 19,662 6,867 6,713 6,082 6,303 1,682 2,322 2,299
Jan 2007 139,010 112,758 1,548 2,370 108,840 19,296 6,718 6,619 5,959 6,956 2,139 2,354 2,463
Feb 2007 140,224 114,193 1,594 2,420 110,179 18,897 6,488 6,595 5,814 7,134 2,258 2,352 2,525
Mar 2007 140,223 113,084 1,623 2,157 109,304 18,737 6,607 6,613 5,517 8,401 2,463 2,624 3,315
Apr 2007 141,836 114,446 1,589 2,229 110,628 18,822 6,533 6,743 5,545 8,568 2,397 2,800 3,371
May 2007 143,372 116,122 1,533 2,197 112,392 18,880 6,352 6,850 5,678 8,370 2,374 2,717 3,279
Jun 2007 144,162 116,434 1,520 2,323 112,592 19,047 6,548 6,771 5,727 8,681 2,368 2,976 3,337
Jul 2007 146,238 118,272 1,527 2,306 114,440 19,190 6,521 6,943 5,725 8,776 2,390 3,113 3,273
Aug 2007 147,942 119,817 1,472 2,364 115,981 19,646 6,804 6,972 5,870 8,479 2,211 3,060 3,208
Sep 2007 149,528 121,243 1,445 2,477 117,322 19,892 6,929 7,003 5,960 8,393 2,166 3,037 3,189
Oct 2007 151,062 122,597 1,411 2,529 118,657 19,939 6,925 7,007 6,007 8,525 2,177 3,223 3,125
Nov 2007 152,997 124,121 1,368 2,541 120,211 20,341 6,946 7,254 6,141 8,536 2,251 3,154 3,130
Dec 2007 153,014 123,722 1,326 2,557 119,840 20,791 7,230 7,362 6,199 8,501 2,210 3,194 3,097
Jan 2008 154,197 124,689 1,268 2,556 120,865 21,047 7,326 7,470 6,251 8,461 2,148 3,236 3,077
Feb 2008 154,971 125,593 1,240 2,538 121,816 21,028 7,255 7,537 6,237 8,349 1,994 3,296 3,059
Mar 2008 154,717 125,091 1,253 2,495 121,344 21,408 7,558 7,566 6,285 8,218 1,947 3,252 3,019
Apr 2008 155,736 126,056 1,267 2,394 122,395 21,544 7,453 7,640 6,451 8,136 1,942 3,200 2,994
May 2008 156,796 127,289 1,291 2,367 123,631 21,579 7,508 7,674 6,397 7,928 1,992 2,910 3,026
Jun 2008 151,289 121,260 1,237 2,348 117,675 21,824 7,199 7,994 6,630 8,206 1,999 3,098 3,108
Jul 2008 152,669 122,112 1,231 2,335 118,546 22,132 7,237 8,275 6,620 8,425 2,544 2,821 3,060
Aug 2008 153,320 122,791 1,265 2,288 119,238 22,121 7,027 8,321 6,773 8,408 2,503 2,832 3,074
Sep 2008 153,594 123,726 1,329 2,231 120,166 21,651 6,882 8,064 6,706 8,216 2,403 2,731 3,082
Oct 2008 153,582 123,910 1,313 2,238 120,359 21,596 7,057 7,786 6,754 8,075 2,302 2,753 3,020
Nov 2008 146,477 116,625 1,267 2,250 113,108 21,728 7,103 7,832 6,793 8,124 2,026 3,093 3,004
Dec 2008 144,576 114,978 1,336 2,455 111,187 21,723 7,225 7,672 6,825 7,875 1,940 3,022 2,913
Jan 2009 151,209 115,446 1,357 2,432 111,657 28,989 7,598 14,757 6,634 6,774 1,447 2,526 2,802
Feb 2009 150,948 115,629 1,372 2,390 111,868 28,617 7,486 14,637 6,493 6,702 1,307 2,595 2,800
Mar 2009 148,800 114,266 1,350 2,308 110,608 28,186 7,321 14,440 6,426 6,348 962 2,637 2,749
Apr 2009 147,861 114,199 1,255 2,270 110,674 27,579 7,276 14,114 6,190 6,082 819 2,620 2,643
May 2009 147,624 114,232 1,200 2,254 110,778 27,376 7,230 14,048 6,099 6,017 769 2,576 2,671
Jun 2009 147,943 114,306 1,177 2,246 110,883 27,651 7,360 14,268 6,022 5,986 724 2,554 2,708
Jul 2009 147,326 114,164 1,149 2,187 110,828 26,970 7,258 13,918 5,794 6,192 767 2,708 2,717
Aug 2009 142,815 110,019 1,112 2,174 106,733 26,646 7,117 13,805 5,724 6,150 754 2,695 2,701
Sep 2009 141,327 110,146 1,111 2,145 106,889 24,764 6,928 12,323 5,513 6,416 807 2,662 2,948
Oct 2009 140,717 110,123 1,101 2,112 106,909 24,201 6,834 12,043 5,324 6,393 849 2,650 2,894
Nov 2009 140,256 110,130 1,062 2,127 106,940 23,906 6,830 11,920 5,157 6,220 989 2,420 2,811
Dec 2009 140,085 110,210 1,029 2,106 107,075 23,802 6,781 11,808 5,213 6,072 748 2,358 2,967
Jan 2010 139,762 110,055 1,007 2,053 106,995 23,711 6,721 11,416 5,574 5,996 707 2,413 2,875
Feb 2010 139,096 109,983 1,033 2,032 106,918 23,371 6,544 11,307 5,520 5,742 704 2,352 2,686
Mar 2010 137,345 109,434 969 1,751 106,714 22,154 5,905 10,944 5,306 5,756 798 2,251 2,707
Apr 2010 136,222 108,470 1,019 1,709 105,742 21,986 5,902 10,816 5,268 5,766 819 2,221 2,726
May 2010 135,707 108,224 952 1,702 105,570 21,857 5,853 10,665 5,338 5,626 784 2,128 2,715
Jun 2010 140,188 107,676 888 1,632 105,155 21,437 5,803 10,312 5,321 11,076 1,781 4,446 4,848
Jul 2010 139,200 107,385 859 1,578 104,948 20,705 5,568 9,937 5,200 11,110 1,551 4,547 5,013
Aug 2010 139,078 107,411 853 1,537 105,021 20,604 5,624 9,830 5,150 11,063 1,488 4,523 5,052
Sep 2010 139,096 107,813 815 1,505 105,493 20,400 5,487 9,742 5,171 10,883 1,376 4,541 4,966
Oct 2010 138,165 107,524 780 1,446 105,298 20,028 5,429 9,501 5,098 10,613 1,380 4,367 4,866
Nov 2010 137,593 107,127 773 1,415 104,938 19,767 5,340 9,361 5,067 10,699 1,577 4,155 4,966
Dec 2010 130,090 99,578 777 981 97,820 18,999 5,402 9,468 4,129 11,512 2,044 4,572 4,896
Jan 2011 129,370 99,289 773 962 97,554 18,609 5,345 9,044 4,219 11,473 1,941 4,633 4,899
Feb 2011 131,001 99,080 683 910 97,487 18,531 5,435 9,192 3,904 13,390 1,967 5,196 6,227
Mar 2011 130,520 98,851 680 904 97,268 18,272 5,282 9,120 3,871 13,397 1,857 5,224 6,316
Apr 2011 129,920 98,627 616 892 97,118 17,921 5,239 8,854 3,827 13,373 1,802 5,141 6,430
May 2011 129,510 98,371 579 880 96,911 17,783 5,205 8,808 3,769 13,356 1,741 5,134 6,482
Jun 2011 129,352 98,335 625 829 96,881 17,699 5,236 8,711 3,752 13,317 1,659 5,191 6,467
Jul 2011 128,692 98,020 527 808 96,685 17,416 5,177 8,512 3,726 13,256 1,631 5,167 6,458
Aug 2011 128,234 97,771 544 769 96,457 17,283 5,206 8,410 3,667 13,179 1,572 5,160 6,448
Sep 2011 128,302 97,964 546 989 96,429 17,172 5,168 8,336 3,668 13,166 1,404 5,314 6,448
Oct 2011 111,009 80,798 530 686 79,582 17,139 5,105 8,066 3,968 13,073 1,386 5,257 6,430
Nov 2011 110,832 80,723 523 666 79,534 17,009 5,049 8,037 3,923 13,101 1,305 5,370 6,427
Dec 2011 110,287 80,396 468 608 79,320 16,617 4,956 7,865 3,795 13,275 1,429 5,394 6,451
Jan 2012 109,601 80,190 472 586 79,132 16,220 4,989 7,456 3,775 13,191 1,390 5,350 6,450
Feb 2012 109,218 79,954 458 584 78,913 16,107 4,953 7,414 3,740 13,156 1,386 5,309 6,462
Mar 2012 108,953 79,874 453 573 78,848 15,916 4,896 7,312 3,708 13,164 1,355 5,221 6,588
Apr 2012 109,208 81,031 452 582 79,997 14,987 4,283 7,037 3,667 13,190 1,370 5,145 6,675
May 2012 109,006 80,819 444 583 79,791 15,018 4,360 6,992 3,667 13,169 1,346 5,080 6,743The columns are:
A = Total Loan Amount
B = Total House Purchase Loan Amount
C = House Purchase Up to 1 Year
D = House Purchase Over 1 Year and up to 5 Years
E = House Purchase Over 5 Years
F = Total Consumer Credit Amount
G = Consumer Credit Up to 1 Year
H = Consumer Credit Over 1 Year and up to 5 Years
I = Consumer Credit Over 5 Years
J = Other Loans Amount
K = Other Loans Up to 1 Year
L = Other Loans Over 1 Year and up to 5 Years
M = Other Loans Over 5 Years
I have attempted to match these with the IBF/PwC Mortgage Market Profile and the CSO RPPI to get some insight into property-related loans.
The IBF/PwC Mortgage Market Profile (ibf.ie/gns/publications/rese … arket.aspx) numbers are published quarterly and are currently available up to Q1 2012. It gives information on new loan amounts. I have converted the quarterly numbers into monthly ones by dividing by three. This is simplistic but it is the easiest approach rather than trying to fit a curve or perform non-linear interpolation.
The Central Bank lending figures are available per month up to May 2012. These are for total loan amounts outstanding.
These are all general numbers for all of Ireland and so not take into account regional variations.
I have omitted adjusting for CPI because of issues such as which CPI to use - general or specific property price CPI and how to adjust the components of the total property related loans - newer loans implicitly take account of CPI while older ones could be adjusted.
I am using the CSO RRPI National - All Residential Properties which provides a gross view of property prices with all the flaws stated elsewhere.
Chart 1 shows Total Loan Amount, Total House Purchase Loan Amount, Total Consumer Credit Amount and Other Loans Amount for the interval Jan 2003 to May 2012.
Chart 2 shows the proportion of Total House Purchase Loan Amount to the sum of Total Consumer Credit and Other Loans Amounts.
Chart 3 shows the values of Total House Purchase Loan Amount and the sum of Total Consumer Credit and Other Loans Amounts. Not unsurprisingly, non-property loans have increase both as a portion and in absolute numbers. Presumably this is as a result of increased loans such as credit cards.
Chart 4 shows the components of Total House Purchase Loan Amount: House Purchase Up to 1 Year, House Purchase Over 1 Year and up to 5 Years and House Purchase Over 5 Years for the same interval.
Chart 5 shows the Total House Purchase Loan Amount and the CSO RPPI. The chart contains two Y axes: the left one applies to Total House Purchase Loan Amount and the right applies to the CSO RPPI.
It is interesting that the total amount of outstanding property loans correlates so well with the CSO RPPI numbers (R-squared of 0.6071 for those interested). Total property-related loans should lag behind house prices.
Total House Loans Amount = Previous Total House Loans Amount + New Total Property Loan Drawdowns - Total House Loan Amount Repaid
Chart 6 shows the estimated monthly new property-related loan drawdowns (taken from the IBF quarterly numbers mentioned above). Not unreasonably, these are correlated (R-squared of 0.8191 for those interested). While correlation is not causation, there is clearly a very close linkage. Note that is based on the IBF quarterly data where I have derived monthly values by a simple division by three. More granular data could yield a higher correlation.
Interestingly, the R-squared between CSO RPPI and Existing Total House Loans Amount (loans less new drawdowns) is 0.5377 indicating a still reasonable correlation.
From the Central Bank and IBF data it is possible to estimate the amount of property-related loans repaid. For example, in Jan 2005, the Total House Loans Amount is 74,718 million. In this month, according to the IBF data, an estimated 13,198 million of new property-related loans were drawn down. In Feb 2005, the Total House Loans Amount is 75,820 million, an increase of 1,102 million. So an estimated 12,096 million in loans must have been repaid between Jan 2005 and Feb 2005. And so on.
The value of Total Property Loan Drawdowns includes all property-related loan types First-time Buyer Purchaser, Mover Purchaser, Residential Investment Letting, Re-mortgage and Top-up. ( I have covered these elsewhere here xxx check for Mover Purchaser).
Chart 7 shows details on loan repayments and estimated net new property related lending.
Estimated net property related lending has been negative (that is lending is less than repayments) since Jan 2010 with the exception of Aug 2010, Sep 2010 and Sep 2011. This is based on dividing the quarterly figures from the IBF by three to get monthly values so it is not accurate for individual months but accurate overall.
The values are:
Month Estimated Net New Property-Related Lending
Jan 2010 - 155
Feb 2010 - 72
Mar 2010 - 549
Apr 2010 - 964
May 2010 - 246
Jun 2010 - 548
Jul 2010 - 291
Aug 2010 26
Sep 2010 402
Oct 2010 - 289
Nov 2010 - 397
Dec 2010 - 7,549
Jan 2011 - 289
Feb 2011 - 209
Mar 2011 - 229
Apr 2011 - 224
May 2011 - 256
Jun 2011 - 36
Jul 2011 - 315
Aug 2011 - 249
Sep 2011 193
Oct 2011 - 17,166
Nov 2011 - 75
Dec 2011 - 327
Jan 2012 - 206
Feb 2012 - 236
Mar 2012 - 80Chart 8 shows the proportion of the total property related loans that were repaid each month. Apart from the anomalies listed below, the proportion is steadily if slightly reducing. This is a legacy of lengthened mortgage durations: from a standard 20 years to 25, 30 and 35 years as well as non-payment, deferred payment and other factors such as reduced overall payments because of a headlong rush to trackers.
Slower repayments mean less capital to lend which in turn means slower lending for new purchases.
So, property prices are very closely correlated to property loan activity. Without greater lending, any cash-driven stabilisation in house prices will slow down or stop. Once the willing cash buyers or largely cash buyers have cherry-picked the nice/good-value houses, the remainder will not sell or sell slowly at reducing prices.
Clearly there are complex relationships and feedback loops between factors such as:
• Increased Availability of Credit
• Increased Drawdown of Credit
• Increased Supply of Properties
• Increased Number of People Who Will Buy
that affect property prices.
Lending has fallen very substantially and continues to fall. One key question is what is the lending constrained sustainable level of property purchases?
Property prices are also correlated with and affected by other factors such as availability/supply of the types of property people actually want to buy, asking prices and demand including latent demand (which in turn is affected by factors relating to demographics such as overall population size, age profile, children of school-going age, etc.).
Regarding supply, when this is being artificially constrained by NAMA not selling its large stock of apartments, the market is further distorted. These might be bought by investors to rent. An increase in the numbers of rented properties available will depress rent prices which will in turn depress some property prices.
Lending institutions are probably (and are probably obliged to) being selective in those to whom they give property-purchase related loans, in numbers, in types of person taking loan (salary, stability of employment, few or no other loans) and in proportion of the total purchase price represented by the loan. My (unfounded) suspicion is that those classified are “cash buyers” are largely those with a large proportion of the purchase price (say 50% to 80%) in cash rather than being 100% cash buyers.
Personally I am reluctant to make any firm assertions about the property market or even the Dublin part which is all I really care about. Yes, there is some stabilisation in Dublin. No, there are no general price increases in Dublin. The bottom, if it has been reached, will remain at around this level for 3-5 years with some further decreases as cash sales peter out. The right property sells quickly because of latent demand. Where there are multiple interested parties, “relatively” high prices can be achieved. I still do not believe anything an estate agent says on prices or offers on property.
There are some anomalies in the data that cause distortions and which should be examined further, such as:
• The value of loans in the category House Purchase Over 1 Year and up to 5 Years dropped from 6,630 million in Nov 2003 to 2,462 million in Dec 2003 and then 1,182 million in Jan 2004. Does this indicate a large cohort of mortgages that matured at the same time from a previous substantial increase that would have occurred 20 years previously? However, there is no corresponding increase in the value of loans classified as House Purchase Up to 1 Year to which this cohort would have to have passed before maturing.
• The value of loans for House Purchase Over 5 Years went from 104,938 million in Nov 2010 to 97,820 million in Dec 2010. If this was a cohort of loans greater than five years old moving to the Over 1 Year and up to 5 Years group, this group would have increased which it did not.
• The value of loans for House Purchase Over 5 Years went from 96,429 million in Sep 2011 to 79,582 million in Oct 2011.
A small bit of digging and follow-up analysis could convert this into a reasonable paper.
I leave the rest to the bearded ones in academia who are paid to produce (or not produce) such analyses.
