Ronan Lyons analysis of PPR data -“prices have risen”!"

[gleo]

Interesting read of the data from Ronan

“**Median prices have risen by 2% between Q1 and Q3 2012. Do not adjust your sets: yes, I wrote “prices have risen”!” **

First results from the property price register – the IMF effect and rising prices?
Source:
ronanlyons.com/2012/10/01/fi … ing-prices

As I mentioned in my earlier post today, Ireland has –at long long last – a public property price register. I also mentioned that it is a tricky business to extract any meaningful signals about the market as a whole from a database that has no structured information about location (other than county), never mind the property’s attributes, such as size, type, number of bedrooms, bathrooms, etc.

“Tricky” is not the same as “impossible”, though, so in this post, I’ve assembled a few facts and figures about the market, based on the 50,000 market-price transactions that have taken place since January 1 2010.

The IMF effect
The key use of the property price register, when talking about analysing the market as a whole, is the information it contains on the volume of transactions. The picture that emerges is a tale of two halves. The first half is the what happened in 2011 compared to 2010, the IMF effect as the economy in general and property market in particular adjusted to life in bail-out Ireland.

The impact on volumes was clear. The number of transactions in the first half of 2011, at just over 7,000, was 20% lower than the same period in 2010, when it was just over 8,800. Dublin in particular was hard hit by the uncertainty, with the number of transactions down 31%, from 3,100 to 2,100.

The first half of 2012 has been a period of regaining lost ground, with the total for the six months to June 2012 of 8,740 very close to the 8,800 two years previously. Dublin has been driving the higher volume of transactions, with over half of the extra 1,700 transactions occurring in the capital, but in general the increases in 2012 just offset the losses of 2011.

An overview of the volume of transactions by broad region is shown in the graph below.

Trading volume, by regional property market, 2010-2012
A first look at prices
Using a property price register to say anything at all about what has happened prices in the market as a whole is a game fraught with dangers. The most solid statistic is the median (or typical) price, i.e. the one with as many transactions cheaper than it as more expensive. It is quite different to the mean (or average) price, which will be skewed if one property sells for €100m, compared to €10m.

The picture that emerges is one probably far removed from the expectations of conspiratorial types who believed that everyone from the CSO to myself was involved in over-stating (or fabricating) a recovery in the property market. If anything, recent reports have understated the extent to which prices have stabilised. The first graph below shows the median price per region per quarter. The stability since the start of the year is notable, particularly when contrasted with free-falling prices in 2011. Also notable – with the exception of Q2 2012 – is the much smaller rate of decline in prices in Dublin than in other regions of the country. Since 2010, prices are down 20% in Dublin but 30% elsewhere.

House prices by region, 2010Q1-2012Q3 (2010=100)
The second graph below condenses this change in conditions since the start of the year. It shows the percentage change in median price between Q3 and Q1, for 2010, 2011 and 2012. Conditions worsened in 2011, with the national median price falling 7% between Q1 and Q3 2011, compared to 6% 12 months previously. By contrast, median prices have risen by 2% between Q1 and Q3 2012. Do not adjust your sets: yes, I wrote “prices have risen”!

Change in prices, Q3 over Q1, by region (2010-2012)
What next?
Suspicious types should be asking themselves why I chose the rate of change between Q1 and Q3, rather than the more obvious Q2 to Q3. Using Q2 instead would suggest a 14% increase in Dublin prices in just three months. Would anyone believe me if I said that?

That highlights the limitations to using the property price register for any sort of price analysis, even the (hopefully) careful median price analysis I’ve done above. The reason why a median price might shift 14% in just three months relates to the limitations of the data: we know nothing about the attributes of the properties in question. So maybe 3-beds formed a bigger chunk of the Q2 market while there were more 4-beds in Q3. Or perhaps conditions improved in South Dublin, and it formed a much bigger chunk in Q3 than in Q2. Ultimately we just don’t know.

It seems such a shame that having all this transaction price information out there, we can’t undertake any meaningful analysis of trends in prices… yet. I’m working with the tech guys at Daft and we’re hoping to match up addresses of property listings and property transactions. That way, we would know lots more about the properties sold, such as exact location, property type, and number of bedrooms and bathrooms. While this would inevitably be just a proportion of all transactions, and a small fraction of all listings, it would still allow the calculation of a substantive mix-adjusted price index of transactions, which would be a companion to the already existing asking price index.

Wish us luck!

[blown-in]

Im not sure why that particular passage carries critical meaning when he continues with the caveat:

"Suspicious types should be asking themselves why I chose the rate of change between Q1 and Q3, rather than the more obvious Q2 to Q3. Using Q2 instead would suggest a 14% increase in Dublin prices in just three months. Would anyone believe me if I said that?

That highlights the limitations to using the property price register for any sort of price analysis, even the (hopefully) careful median price analysis I’ve done above. "

The disclaimer seems to indicate that given Ronan doesnt intend the commentary nor the analysis which has been done as a useful inidcator today.

[Tyler]

@Barney Gumble

Without some sort of hedonic analysis, you will get prices ‘shooting up’ if people are buying nicer, more expensive houses instead of ordinary cheaper ones. If property starts moving in nice parts of D18, D6, D6W, D2 etc., then a simplistic analysis will give rather misleading results.

is this why there is a floor on South County Dublin i.e. people are not always looking for the cheapest house and there is a premium in this area so once it becomes affordable people want to live there and rush in to buy

does that mean that when people discover South County Dublin is out of reach and always will be that they then buy in next best place and prices then rise in that area

or do people now wait and see

[bigbooks]

@Barney Gumble

Without some sort of hedonic analysis, you will get prices ‘shooting up’ if people are buying nicer, more expensive houses instead of ordinary cheaper ones. If property starts moving in nice parts of D18, D6, D6W, D2 etc., then a simplistic analysis will give rather misleading results.

This reflects my observations of the market I’m interested in (South Dublin). House prices have dropped and are still dropping however the nicer (and more expensive) places are selling (especially in the late spring) and leaving the dross/less attractive and inevitably “cheaper” houses behind. So the median or average (not a statistician) price may increase but the price per individual house is still dropping - if that makes sense.

[23rdbuchan]

One of the most startling aspects of all of this new data is to highlight the volume of cash transactions.

I think that when the cash buyers run out, or at least make up a more normal percentage of a functioning market, there could be some more carnage. It is that that may be the final nail in the crash.

[roc]

@23rdbuchan

One of the most startling aspects of all of this new data is to highlight the volume of cash transactions.

I think that when the cash buyers run out, or at least make up a more normal percentage of a functioning market, there could be some more carnage. It is that that may be the final nail in the crash.

How have overall levels of deposits in the banks fared since the crash?

[Cheeky_Offer]

@23rdbuchan

One of the most startling aspects of all of this new data is to highlight the volume of cash transactions.

I think that when the cash buyers run out, or at least make up a more normal percentage of a functioning market, there could be some more carnage. It is that that may be the final nail in the crash.

This. Cash buyers will not be replaced in sufficient numbers.

[lombardox]

If the house price register suggest that prices have risen more(or fallen less) than the CSO has heretofore indicated, does that mean that cash buyers are actually paying more than those with a mortgage?

[puesyo]

I must be reading the DB in a completely different way than all of you guys. What I have taken form the DB is: houses I have monitored in the last 3 years have invariably (bar for very few instances) gone for far more than I would ever have expected. Anything in South Dublin with decent square footage, decent distribution and ok garden has gone for a lot more than I would have ever thought. Looking yesterday at a lot of the WIWs threads in this site that the appearance of the DB has brought back up again (as in look what they actually sold for after we had been discussing how much we think is worth) did in the end sold for a lot more than anyone in here ever thought it was fair value (again, I am talking about SCD).

To me, this is such a desirable part of the country that prices command such a premium on top of other parts of the country and that combined with the relative lack of supply and continuous strong demand, it is deluding to think that this will ever, ever reach fair value bar for a nuclear war. To me, prices can only go up from here as couples like us realize that “fair value” is never going to be achieved and settle for something a lot worse than they ever expected, somewhat panic buying in the process at one stage or another.

I am in the process of renting at the moment and I am looking at properties renting for in and around 1900 to 2000 per month. The type of income that can sustain a rental price like this can sustain a mortgage of about 400k euros, which, if these couples save a little, put them in the 500 to 700 price bracket. There are tons, tons of couples like this, I kid you not. I mean we have seen properties renting for 1800 and 1900 euros in “undesirable” Knocklyon, that have had more than 30 couple viewing them in one single day. All this couples are out there waiting to buy, just like us. Demand isn’t going to dry up and supply is going to continue to be somehow limited. The “fair value” so banged about in this site has never and will never be achieved, except if we continue using the same metrics and adjust them upwards by some 50% or so just for the privilege of being able to say that you live in “SCD”.

Just my opinion of course.

[the_very_man]

The key thing about all these selling price registers (UK Land registry included) is that they don’t capture the full market.
That is, they take no account (obviously) of properties that do not sell.

For a view of the whole market, this needs to be considered.

[CdeB]

@Cheeky Offer

@23rdbuchan

One of the most startling aspects of all of this new data is to highlight the volume of cash transactions.

I think that when the cash buyers run out, or at least make up a more normal percentage of a functioning market, there could be some more carnage. It is that that may be the final nail in the crash.

This. Cash buyers will not be replaced in sufficient numbers.

What’s the best way of tracking the number of cash buyers each month? Can we now take number of sales less number of mortgages? Would be interesting to see if the correlation between the two (as I agree there surely has to be)

[Landlord]

@23rdbuchan

One of the most startling aspects of all of this new data is to highlight the volume of cash transactions.

I think that when the cash buyers run out, or at least make up a more normal percentage of a functioning market, there could be some more carnage. It is that that may be the final nail in the crash.

According to Central Bank, Irish resident deposits rose 0.7% year on year. The cash buyer must try harder if he going to run out of money any time soon

[Cheeky_Offer]

@Landlord

@23rdbuchan

One of the most startling aspects of all of this new data is to highlight the volume of cash transactions.

I think that when the cash buyers run out, or at least make up a more normal percentage of a functioning market, there could be some more carnage. It is that that may be the final nail in the crash.

According to Central Bank, Irish resident deposits rose 0.7% year on year. The cash buyer must try harder if he going to run out of money any time soon

…but all the civil servants lodging their 100k gratuities already have houses…

[Landlord]

@puesyo

I must be reading the DB in a completely different way than all of you guys. What I have taken form the DB is: houses I have monitored in the last 3 years have invariably (bar for very few instances) gone for far more than I would ever have expected. Anything in South Dublin with decent square footage, decent distribution and ok garden has gone for a lot more than I would have ever thought. Looking yesterday at a lot of the WIWs threads in this site that the appearance of the DB has brought back up again (as in look what they actually sold for after we had been discussing how much we think is worth) did in the end sold for a lot more than anyone in here ever thought it was fair value (again, I am talking about SCD).

To me, this is such a desirable part of the country that prices command such a premium on top of other parts of the country and that combined with the relative lack of supply and continuous strong demand, it is deluding to think that this will ever, ever reach fair value bar for a nuclear war. To me, prices can only go up from here as couples like us realize that “fair value” is never going to be achieved and settle for something a lot worse than they ever expected, somewhat panic buying in the process at one stage or another.

I am in the process of renting at the moment and I am looking at properties renting for in and around 1900 to 2000 per month. The type of income that can sustain a rental price like this can sustain a mortgage of about 400k euros, which, if these couples save a little, put them in the 500 to 700 price bracket. There are tons, tons of couples like this, I kid you not. I mean we have seen properties renting for 1800 and 1900 euros in “undesirable” Knocklyon, that have had more than 30 couple viewing them in one single day. All this couples are out there waiting to buy, just like us. Demand isn’t going to dry up and supply is going to continue to be somehow limited. The “fair value” so banged about in this site has never and will never be achieved, except if we continue using the same metrics and adjust them upwards by some 50% or so just for the privilege of being able to say that you live in “SCD”.

Just my opinion of course.

+1

Often I am accused of spinning data to suit my agenda but the property database is leaving quiet a few pinsters looking for cover as regards pricing in SCD.

[blackdog]

@Landlord

According to Central Bank, Irish resident deposits rose 0.7% year on year. The cash buyer must try harder if he going to run out of money any time soon

possibly a stoopid question, but does this take into account the interest irish deposit accounts pay?

[jammyBastard]

@Landlord

@23rdbuchan

One of the most startling aspects of all of this new data is to highlight the volume of cash transactions.

I think that when the cash buyers run out, or at least make up a more normal percentage of a functioning market, there could be some more carnage. It is that that may be the final nail in the crash.

According to Central Bank, Irish resident deposits rose 0.7% year on year. The cash buyer must try harder if he going to run out of money any time soon

Our deposits (Irish residents) have grown by 25% in the year to date, and we’ll never be cash buyers. How can you so simplistically attribute an increase in bank deposits to cash rich buyers?

[Cheeky_Offer]

This gets back to the basic point we raise time and time again on here (Sharper et al.)

SCD is not cheap. SCD has never been cheap (even in the 80s). There are enough accountants, lawyers and IT professionals waiting to move to hoover up interesting properties for the next while. Yes, in the 80s civil servant could buy next to the bankers but there are a lot more professionals around in 200k households to squeeze people out. Some people seeking period properties need to re-adjust - Bray is not THAT far away.

This should not take from the fact stuff is still selling at a substantial discount to the boom - is not rising (other than in pockets), the state is running a 20bln deficit, a harsh budget is coming and there are more downside macro economic risks than upside.

[puesyo]

@Cheeky Offer

This should not take from the fact stuff is still selling at a substantial discount to the boom - is not rising (other than in pockets), the state is running a 20bln deficit, a harsh budget is coming and there are more downside macro economic risks than upside.

I dare anticipate that this is not going to make one tiny bit of difference to this particular market in this particular location

[Objective_Investor]

@puesyo

The “fair value” so banged about in this site has never and will never be achieved, except if we continue using the same metrics and adjust them upwards by some 50% or so just for the privilege of being able to say that you live in “SCD”.

In fairness it’s not just that you get to say you live in SCD, you also get to live there!

+1 to your general argument though, the premium is here to stay

[blown-in]

Yes, if you dont have 1m to spend you can just fuck off to the north side. Or Bray.