New property index shows size of boom and bust market

Up to now we’ve been getting only a glimpse of what is going on under the bonnet of Ireland’s property market. The CSO’s revamped Property Price Index, however, goes a long way to remedying this information gap.

The new dataset is based on stamp duty returns rather than mortgage drawdown data, which don’t necessarily reflect the price paid for properties. It also includes for the first time comprehensive figures on cash purchases, which were omitted from previous calculations even though they account for about 50 per cent of all sales.

New standards

The new index, which will now become the standard monthly indicator of price trends, reveals Ireland’s property crash was more severe than previously estimated, with the peak to trough fall put at 54.4 per cent rather than 50.9 per cent.

It also suggests recovery, which is being driven by the Dublin market, has been stronger than previously stated, with prices up on average by 43.2 per cent rather than 37.4 per cent.

So essentially the bust and partial recovery of the last few years has been more pronounced than we thought.

These findings are perhaps less significant, however, than another new aspect of the CSO’s survey. For the first time it has published the average price paid for properties broken down by postcode, revealing a level of market topography hitherto unseen. Previously the index merely compared Dublin to the rest of the country.

This reveals that in some parts of Dublin prices have rebounded by as much as 60 per cent since the 2013 trough, while the increase has been as low as 20 per cent in parts of Mayo and Roscommon.

The numbers also show that within Dublin price variations are equally pronounced. Take, for example, the difference between Dublin 6, which covers Ranelagh and Rathgar, where the average price paid for properties last year was €733,006, and Dublin 10, which includes Ballyfermot and Cherry Orchard, where the average price was just €157,527.

Outside of the capital, Greystones, Co Wicklow, had highest average price (€404,717), while Castlerea, Co Roscommon, trailed in last with an average price of just €72,350.

Cash buyers

While the data did not explicitly state that cash buyers were the beneficiaries of significant price discounts compared with other buyers, CSO statisticians confirmed the numbers strongly reflected this.

Non-household buyers such as private equity companies and Reits, which would normally pay cash, for example, accounted for 19.6 per cent of all market transactions in Dublin during 2014 and 19.2 per cent in 2015.

This relates to another aspect, namely the declining share of the market occupied by first-time buyers, which has fallen from 53 per cent in 2010 to 24 per cent in 2015.

This piece of information will not go unnoticed by the Central Bank, which is conducting a review of mortgage lending rules amid a clamour for the current restrictions to be softened, especially for first-time buyers.

The new numbers also reveal that the Irish market is almost entirely comprised of sales of existing dwellings, with new homes making up only a small fraction of the recorded transactions. In 2015 the number of new dwellings sold amounted to 2,489. This was dwarfed by the 35,580 sales of existing dwellings.

The cascade of new data understandably overshadowed the monthly numbers, which pointed to a slight acceleration in the rate of property price inflation.

Average prices increased 2.5 per cent in July, compared with a 1 per cent uptick in June, giving rise to an annual inflation rate of 6.7 per cent, up from 4.9 per cent the previous month. This suggests the Central Bank’s rules are not having as dampening an impact as some are claiming.