1st October 2012
Towards a Better Approach to Housing Policy
This Daft.ie Report shows a different pattern between the housing market in Dublin and the rest of the country. The year-on-year change in asking prices in South County Dublin is just -2% (compared to -20% or more in a couple of counties and -14% on average). Approximately half of all properties are now sold or sale-agreed within three months in the capital (compared to one quarter or one third elsewhere in the country). Indeed, the supply of properties in Dublin has somewhat dried up - the total stock in the capital on 1 August 2012 was lower than at any point since March 2007. Outside the capital city and urban areas the situation is different, and indeed Munster (outside of the cities) has experienced its largest average quarterly fall since Daft.ie records begun.
Of course, one of the remarkable things about housing debates today is the prevalence of economic analysis, usually based on charts and graphs (which may be indeed accurate) followed by commentary from housing market apologists. Housing discourse, in the main, in Ireland, is dominated by this economic "science", venerated by the mass media. The use of trends and graphs to explain and predict the future development of the housing system appears almost divine, in the absence of other prophets. All future possibilities are known and predictable. Contemporary economic consensus (even after the comments in the Nyberg Report of the group-think in Ireland) still revolves around a few factors and indicators. This meta-narrative, based on international neo-liberal economics, sets the boundaries of the public and indeed political discourse.
Of course, we know that the number of circumstances where we can make such predictions are quite limited and often based on highly precarious implied but seldom acknowledged assumptions. Clearly, housing markets do not suddenly emerge and operate according to (first year) economic textbook models, tending towards market equilibrium. Indeed, housing market activity in owned and rented housing forms a very small part of the overall operation of the housing system.
Housing on the Other Side
Aside from hallowed predictions of housing market trends, the other side of Irish housing portrayed in the media involves sensational accounts of poor housing, homelessness and the awfulness of life on social housing estates. Many of these areas are truly "undeserved communities" which remain stigmatized, despite regeneration, remedial works, and the symbolic "tenant participation" and social inclusion approaches. Yet, their residents are demonized through derogatory stereotypes, often imported from the UK media. The public gatekeepers and managers of this residualised housing sector receive regular criticism, as if they could transform poor housing for poor people at will. Indeed, in a country which celebrates a Republic of equal citizens it is remarkable that, unlike other European countries, Ireland has no representative organisations of tenants, either social or private.
A New Mindset is Needed
The All-Party Oireachtas Committee on the Constitution - Ninth Progress Report - Private Property (2004) suggested that we needed a new mind-set in Ireland in how we view development land and the notion of property. The value of development land derives largely from the actions of the State in zoning, planning, providing infrastructure, services, etc. Ronan Lyons of Daft.ie has proposed this progressive approach be applied to the new "property" tax. So too, with housing. Housing is planned, funded, built and allocated within a national housing system comprised of interacting State and non-State actors. Ownership and rental markets, in Ireland, are highly supported or buttressed by State subsidies, regulatory intervention and other supports.
The international literature on housing systems, endorsed by the World Bank and IMF, accepts that effective housing systems in contemporary market societies require five key elements:
There is also a need to include the private rented sector, now highly regulated in Ireland, and fast becoming the new social housing.
Towards a Sustainable and Equitable Housing System
To create a sustainable and equitable housing system in Ireland we need to develop a modern approach - a new mindset, focusing on the housing system as a whole, including its interactive components. We also need a "Courageous State" (See Murphy, R, London, Searching Finance, 2011), which is not afraid to act in the public interest to regulate this housing system. A Courageous State is populated by politicians who believe in government which exists for the public good. The Courageous State would eschew deference to simple market approaches, recognizing that housing systems as whole require intervention in many areas. These include law, finance, infrastructure, regulation, consumer protection and subsidized housing.
The "comprehensive" Irish housing plans of the past largely confined themselves to analyzing, promoting and planning social housing. A small group of stakeholders or "partners" took part, whilst outside this process banks borrowed international money and created a devastating housing bubble. Could this or something similar happen again?
In many ways, the planning framework for a sustainable and equitable housing system does not exist at present. Currently, there is little indication of a Courageous State and Courageous Politicians seeking to establish effective governance and regulatory approached to the housing system as a whole, underpinned by recognition of housing rights - limited though these are. Treating all the elements of housing systems in isolation is myopic, and symbolizes a "cowardly State". Effective governance and regulation will require the commitment of banks and banking regulators, legal reformers and the courts service, consumer protection agencies, housing related professional bodies and service providers, infrastructure and other investors, landlords, tenants, as well as advocates for social housing. Indeed, the new proposed mindset for housing in Ireland might borrow some ideas from our international financial supervisors. How about a Regulator for the housing system as a whole, Regulators for housing standards, or Regulators for improved quality of life on housing estates?HIGHLIGHTS:
Amazing how economists can try and present this data in a positve manner. i thought the central banks said houses throughout ireland were 'over valued' . Some of these houses on the market outside dublin need to chop 25percent off their asking prices.. *its clear that less houses are being put on the market as sellers have given up what they feel is a fair price, so any price rises that may show up in 2013 are pretty much blips in the statistics.
It is cheaper to buy rather than rent so the problem seems to be access to credit for most first time buyers . It is only when the market has bottomed out and begins to rise ( like Dublin rose by 2.4% in Sept 12 ) that demand will increase . Here in Cork there are 7000 properties on the market and annual sales of 2000 , demand is still weak , I guess due to lack of credit .
If it is cheaper to buy rather than rent and very few houses have been sold in the last 5 years then there must be a wall of young people ready to buy . 40 % of sales are cash buyers .
I bought 10 years ago and will finish my mortgage in 5 years time , many existing mortgages have little or no mortgage maybe 50% of the national stock , in the next 5 years many mortgages will finish . Once this happens people will think about trading up , I certainly will but I am happy to wait it out and pay off the mortgage little by little .
My advice to first time buyers is , save , save , save
This was never a property crises , it was a banking collapse , mainley anglo irish
I find it interesting that house we are still talking about asking prices and not the SALE PRICES!!!
I'm not expert, but what do asking prices actually tell us? I'm not overly interested in how much the asking prices go up or down, I'm very interested in how much the sale agreed and ultimately sale completed prices go up, or down as the case may be.
I haven't studied the new Property Price Register in great detail yet but I did a search of properties sold in September 2012 in Dublin and cross checked the prices on the register against the prices on Daft. Some properties did not show up (possibly removed as sold?) but two did and the asking price matches to the penny the price quoted on the register.
Has anyone done/ in the process of doing any research into the asking prices versus the prices on the register? I'd be interested in a survey that shows the difference between asking prices and actual sale prices.
I think now is the time to lay the cards on the table. I'm afraid to buy at the moment as I don't know if I'll get tricked by the apparent smoke screens of the property market. I'm also afraid not to buy as access to credit is still uncertain and other factors such as property tax, the next budget, TRS etc all play their part.
Its fair to say that most people don't want to sell at the moment as they will sell at a loss if they bought in the last 10 years. Ordinary Joe soaps like me don't know whether to bite the bullet and buy or hold out in anticipation of further movements in the market.
I'd wonder if all the relevant information was laid out for all to see, would it kick start a run on offers again, thereby introducing some demand again.
Or maybe I'm totally wrong. In any case, I'd be very interested to hear more peoples views.
hi reporters we would have the book from you.
Good show , some stability in Dublin City at this stage is great news with half the sellers finding buyers within 3 months. It's a great time too if you can trade up for a larger property, the gap has never been narrower as a 10% drop on a large property is a lot more in money terms than a 10% drop on a small property.
this Market has the ability to bounce (never back to the dizzy heights of 2007 in the med. Term ) but a little confidence from UK ( latest unemployment figures getting better) and reasonable US housing numbers means a warmer breeze is coming our way . The first 15% gain is always the fastest and you can never call the bottom but we must be there or there a bouts. Good locations in the country appear to offer the best value now.
Good luck , I don't think there has been a better time to buy , a home is for the long term , 10 years plus , and I don't think anyone will have any complaints by then.
An expat buyer from the UK .
In my opinion its still a very mixed market. I'd hardly call it stability in Dublin. A more accurate interpretation would be that supply is currently lower than demand.
The smart money would say this is because people will only market a property if they have to. Think about it. Who wants to sell when the prices are the lowest they have been for years.
Speaking in Dublin, 3 bed houses are in demand at the moment as the market has retracted to a point that a first time buyer can now afford one. In the boom, this group of buyers would have been more restricted to the apartment market.
The next 6 months will be interesting in Dublin property due to a number of conflicting factors. Asking prices will rise on basis of excess interest over supply in the market, this will be further supported by selling agents highly promoting a feeling of a renewed market (call it self preservation). This will be counteracted by the loss of tax relief at the end of the year and the inevitable upcoming budget.
It would be nice to see greater use of sale price data in the next report
Property investors seeking high rental yields are piling into the Dublin property market where rents are increasing.
Although stringent mortgage lending conditions have eased somewhat in recent months, rental growth in the Irish capital is still being underpinned by an irrationally tight mortgage market, which is pushing potential purchasers into the rental market.
The rise in tenant demand is in turn helping to push rental values higher across parts of Dublin; an attractive proposition for rental investors looking to secure a decent property investment in Ireland.
“Rents have gone up recently in Dublin and in some cases people are reporting that it is as cheap to pay a mortgage as it is to rent, said Ronan O’Hara, director of Savills in Ireland. “Access to credit also seems to have improved a little.”
Aside from increasing rents, property prices are still falling as desperate vendors slash prices in order to secure a sale, consequently pushing rental yields higher in the process.
Unsurprisingly, one major estate agent saw a 400% hike in the volume of purchasers viewing properties in Dublin during Q1 2012, with demand generally greatest for properties in Dublin.
O’Hara added: “Property purchasers now feel comfortable bidding because they feel there is now genuine value in the market place. In addition to this, vendors are now in the main being very realistic, so prices are fair and buyers are responding favourably
I think it’s too soon to say whether house prices having finished falling, given the economic uncertainty. The declines may well resume when interest rates rise, or if unemployment heads higher.
For now though, the failure of house prices to drop as much as many predicted before the crash (including me) makes me wonder if I underestimated a structural shift to higher irish house prices in real terms.
It’s claimed that Albert Einstein said the definition of insanity is doing the same thing over and over again, and expecting a different result.
I agree. I’d like to own a house someday, and I don’t want to keep sitting out the property market if it’s for no purpose, only to watch prices take off once more.
“When the facts change, I change my mind,” said the economist Lord Keynes.
So did I miss some changed fact in my previous analysis of house prices? As the old socialists used to chant: What about the workers
Thanks for another great post, I agree the Daft index does not look informative.
I have two questions:
Firstly, in previous posts you have convincingly emphasised the importance of each individual's circumstances. Does this apply to the decision to buy or rent? One way to evaluate this decision is to compare the costs of buying and renting similar properties.
If you do this, might the price and equivalent rent of the specific home you are thinking of buying be more important than the average house price? For example, if a house had a motivated seller and so had lower costs (inc. opportunity cost of your capital) than renting a comparable home, would you still avoid buying because the market as a whole was overvalued?
In previous posts you've expressed skepticism about "timing the market", does this apply to the housing market? I presume you are not looking to speculate on house price appreciation, but buy a home to live in for many years. In which case are the future movements in house prices that important? Aren't the benefits you will derive from a home are essentially the same regardless of its current value?
Secondly, the price of a home is a function of the supply and demand in the local market for homes. If more homes are built in an area, prices are likely to be lower than if fewer homes are built. Are you lobbying you TD and Councillors to allow more building and development in areas you hope to live in? One of the consequences was to give more power to local people in planning decisions. Unfortunately, the most engaged local people tend to be those against further development (generally home owners). Those, like you, who would benefit from an increased supply of homes tend not to voice support of new development. But you could potentially decrease prices by lobbying your representatives to increase the supply of planning permissions for new homes.
I would be most interested in your thoughts on this
For many areas confidence never returned after prices started falling at the end of 2007, but for in-demand locations, especially in the Dublin, it was back to the rise from mid-2012 onwards.
But that looks to have ended, although some hopeful sellers are still demanding 20010 prices.
The flipside to the lack of confidence and falling prices is that on the surface mortgages continue to get slightly easier to secure and borrowed money at the moment is cheap by historic standards. So if you can get a good deal and a good rate, now is a good time to buy provided you accept prices may fall in the short term.
Mortgage rates for those with a 25% deposit look very good, while rates for those with 15 per cent and 10 per cent deposits are improving. If lenders are willing to let borrowers through their tough lending criteria, this could deliver buyers for whom property looks affordable if prices ease back.
The questions are whether they want to take the plunge while the effect of spending cuts filtering through the economy and how on the other side of the fence lenders will be hit by tougher regulation and their own lack of confidence.
So should you buy? The answer should be based on how long you plan to own the property (whether as a home or investment), whether it personally suits you and most importantly whether you can afford it.
Buyers preparing to take the plunge should bear these factors in mind and ensure they can take the hit of future interest rate rises and a fall in house prices.
Confidence may return and the property market rise from here, but if things take a turn for the worst it is also not unrealistic to see prices falling by 10% over the next year or two.
Caveat emptor (buyer beware) and make sure you'd be happy in your new home, because you could be stuck there in five years' time.
Interesting fact there is 40% less property to rent in Dublin than 6 months ago , the next big big issure is lack of rental property ...
Dublin, 24th October 2012: The Irish property market has changed fundamentally in a short space of time and for many the gloss has gone off home ownership, according to Dr. Lorcan Sirr, lecturer in the School of Real Estate and Construction Economics at DIT.
Speaking today at the National Construction Conference in Dublin, Sirr said “There is finally recognition that renting is good for the economy, bringing with it economic mobility and little risk especially for personal savings. Government housing policy is changing to better balance the options of owning or renting.”
In his presentation to delegates at the Conference, Dr. Sirr highlighted some recent statistics in relation to residential renting. Home ownership levels are now down below 70% in Ireland and 18.5% are now renting – a figure similar to that in the late 1950s. In Dublin over 30% of residents now rent their accommodation.
“It’s not only those numbers that are surprising - it’s the rate of change: nationally, those renting are up nearly 50% in the last five years. The problem is, the property market is not ready for this change, leading to a shortage of decent accommodation, especially for families.”
Dr. Sirr described three significant elements that are influencing the rental market in Ireland:
1) The type of renter is changing: the new renters are almost the opposite of the stereotypical renter: they are choosy; traditionally ‘mortgageable’; previous owners with lump sums in the banks they’re not willing to risk on property ownership; over 65s; DOODs (don’t own or drive); and families;
2) What they want is different: no more damp basement flats. They want flexible single- and multi-storey units; shell only with layout options; 60m2 – 150m2; separate storage for skis, roofbox etc. and laundry (ground floor, basement); multi-aspect; high-standard finishes; secure bicycle parking; and professional management preferably with live-in maintenance; transparent fees. And to be able to rent for the long-term with security of tenure. Essentially they want a home without the debt.
3) But where they want to live hasn’t changed – traditional, well-established suburban locations are still a main draw.
At this moment, according to Dr. Sirr “The demand is there, the need is there, but the accommodation is not! The market has a need for professional landlords who will apply the principles of commercial property investment to residential development: good accommodation means better tenants with more security of income.”
Just looking at the daft data , there was 1650 houses for rent in dublin in the first 6 months of 2012 , now that's down to 950 !!! .. People are not buying but renting yields will go up due to shortgage and thereafter house prices will rise ....expect house price to rise 20 - 30% in the next two years. simples !! the dynamic has changed.
its actually down to 870
Lars Frisell thought it would be easy to find an apartment to rent in Dublin, the epicenter of western Europe’s biggest real estate crash, after he moved from Sweden to become chief economist at Ireland’s central bank.
Three months later, he’s still looking, joining the ranks of students, high-tech professionals and frustrated would-be homebuyers competing for space and pushing up rents in the Irish capital.
“You’d think that there’d be so many apartments and so many houses available,” Frisell told a gathering of Irish accountants on Aug. 30. “There’s not.”
The property crash and lack of financing has encouraged the Irish to rent rather than own their properties, lifting the number of households in rented accommodation by 47 percent in five years, the Central Statistics Office said in a report last week. That’s creating an opportunity for real estate investors to profit from higher rental income.
Kennedy-Wilson Holdings Inc. (KW) wants to own more than a thousand homes in Ireland after purchasing a 210-apartment block close to Google Inc.’s European headquarters, according to Peter Collins, the Dublin-based managing director of the U.S. investment firm’s European unit.
Ireland “is very much a rental play for us,” Collins said.
Kennedy-Wilson teamed with Canadian insurer Fairfax Financial Holdings Ltd. to buy the Dublin apartments for about 40 million euros ($50 million) in June. The Beverly Hills, California-based company owns about 14,000 homes across Japan and the U.S.
Renting a home became more common after Ireland’s 10-year property boom ended in 2007. The proportion of households that own their homes dropped to 70 percent last year from 75 percent in 2006, according to the Central Statistics Office report.
From my own experiance , my rental has risen 125 per month in darty for 3 bed , that up from 1500 last year , its getting to the point you might be better off buying
Investors view :
The December 2011 Budget introduced a window where zero capital gains tax will be payable on property acquired before the end of 2013 and held for seven years. This very attractive incentive is priced into investor’s analysis of their target returns and therefore has a positive impact on pricing. With less than 15 months remaining in this incentive the market is anticipating demand remaining strong for this period. Investors are also looking at Ireland and as many of these overseas entities tend to follow more opportunistic investors into a new market rather than lead, it is therefore expected that demand from this sector will continue to increase.
Vendors need to consider what investors value and which of their assets match this requirement. Sales prices are currently exceeding expectations once buyers are competing for the opportunity that ticks all of their investment criteria boxes. Turnover of asset sales completed should reach €500m in 2012 with residential/multi-family units accounting, now becoming a very established investment sector. If existing demand is met in 2013 this volume of sales could increase to in excess of €1billion. Funding is more readily available for prime assets and NAMA staple finance has ensured that their sales are not impeded due to finance.
Whilst an increase in the supply of funding would impact on the volume of activity, it is not the primary cause of the low level of transaction volumes. This is further evident in the portfolios of loans sales, also in strong demand with approximately €250million expected to be transacted this year with a large volume of secondary assets being likely to come to the market from these loan sales.
Finally, the sentiment toward Ireland is now very favourable and internationally we are no longer the “I” in PIGS. There is a real sense of positivity from Irish and overseas investors about Ireland, clearly supported by the volumes of demand. It is important the market responds to this to enable new equity to invest and present new ideas which will stimulate growth.
Run the analysis on the national level. I would argue that the macro factors affecting the broad Dublin market would apply also to Cork, particularly the influence of credit.
I did note that if any city could claim that population growth has had an effect on house prices, it would be Dublin (and Glaway, oddly enough). But let's also not gloss over the fact that that not one new housing unit has been built since 2008 for every 2.56 new people added to the cities.....showing a building shortage that would warrant real rent price increases on the scale we have witnessed.
The ordinary Joe is being done for high rents in Dublin , yes there going up , am down about €50 per month since last year , its a landlords market now that no one can get a mortgage
Would anyone be able to point me to where the monthly stats are published? Im interested in the Oct 2012 index value (45.4 in September from the q3 report). Thanks in advance.
The first step forward is for buyers to enter the market, but at a glance, one could say that demand for appartments and traditional first time buyer properties 2 beds have weakened - so what we have here is a market that is no longer a ladder - first time buyers are buying good sized family properties - but what will happen to the old first time buyer land - this will continue to be occupied by renters or may and I am not certain of this in Dublin but can say confidently outside of Dublin will fall into obselesence - this is the only reasonable conclusion - otherwise there is going to be a massive social problem whereby these once smart appartment blocks occupied by professionals will be replaced by people on social benefits - and the state will be paying for these obselete property - something very radical needs to be done and fast before this economic phenomenon takes hold - the only thing to do is demolish property that will harm any recovery - this seems madness but ratonalising the property market will repair the market that has been damaged by over supply of appartment blocks and small sized dwellings that buyers no longer have any apetite for.
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