Property market in Dublin showing signs of stabilisation

Ronan Lyons, Economist

2nd Apr 2013

Ronan Lyons, Daft's in-house economist, commenting on the latest Daft research on the Irish property market.

The Dublin differential - some warning signs for Government

The last 12 months has been one of changes in Ireland's housing market. Cast your mind back to late 2011. Then, asking prices in Dublin were falling at a rate of more than 20%, year-on-year. The year following Ireland's entry into the Troika programme in December 2010 was probably the worst in Ireland's property market crash, with rapidly falling prices and an even more precipitous fall in transactions symptoms of a lack of confidence in Ireland's economic future.

With the launch of this Q1 report for 2013, however, there is a vastly different picture emerging. The Daft.ie asking price index in March 2013 stood just 2.3% lower than a year previously, the slowest pace of price falls since late 2007. The new house price index based on the Residential Property Price Register shows a similar slow-down in house price falls. But that national average hides huge differences around the country.

In South County Dublin, asking prices are now 6% higher than a year ago, a rate of change not seen since early 2007. After 19 straight quarters of falling prices, they have now risen in that area in four of the last five quarters. Prices are also higher, year-on-year, in Dublin city centre and in the South City region, while in the North City region, they are roughly stable (down -0.5% year-on-year).

In contrast, in Connacht-Ulster, asking prices are 15% lower now than a year ago. This means that the fall from the peak in Dublin is now smaller than in Connacht-Ulster. The first graph below shows the huge contrast between prices trends in Dublin and those elsewhere. It seemed - from late 2007, when prices in Dublin had started to fall but were still rising elsewhere, to mid-2010, when the rate of decline outside had persistently been lower than in the capital - that house prices in Dublin were being punished for past excesses.

Annual change in asking prices, by region

In fact, this was just a result of differences in properties around the country. A key point to remember in Ireland's property crash is that smaller properties have seen larger falls from the peak. Once this is joined up to the fact that Dublin has on average smaller properties than elsewhere, it is easier to see that the apparently larger fall in house prices in Dublin is mostly a reflection of different stocks of property in urban and rural areas.

Once the switch is made to a like-for-like basis, a very different picture is emerging. The second graph below shows what has happened prices for two like-for-like properties in South County Dublin (solid line) and in Mayo (the dashed line): a four-bedroom detached house (the orange lines) and a one-bedroom apartment (the blue lines). For all properties, the peak - the third quarter of 2007 - has been set to 100.

Dublin vs Mayo prices

First, it is immediately clear just how much prices for smaller properties have fallen by more. Prices for a one-bedroom apartment in South County Dublin are down 62% from the peak while in Mayo they are down almost 72%. In contrast, the price of the detached home is down just over 40% in Dublin and just over 45% in Mayo.

Second, it is also clear how different the trend in prices in South County Dublin (the solid lines) has been from the trend in Mayo, since early 2012. Put another way, the gap between Dublin prices and those elsewhere is growing. In 2007, at the height of the bubble, a 4-bedroom detached home in South County Dublin was 3.2 times the prices of the same property in Mayo. That ratio fell to 2.6 by early 2012 but has since risen - and risen rapidly - to 3.5. Similarly, the price of a 1-bed apartment in South County Dublin was between 2 and 2.5 times one in Mayo throughout the end of the bubble and first years of the crash. In the last 12 months, though, the ratio has increased from 2.2 to 2.8.

This has huge implications for the Government. If prices were still falling, a widening differential would signify that first-time buyers are no longer prepared to sprawl and pay the opportunity and petrol costs of long commutes. But with prices actually rising again and only in certain parts of the country, this may be a signal that not only is this the case, but that also there are not enough properties in Dublin for them. If areas close to jobs and other amenities need new homes, hoping that even more sprawl will solve the problem is not a viable option. Density works well elsewhere - it can work in Ireland too.

HIGHLIGHTS:

Sale Index
Asking Prices, Residential Sales

Stock and flow of properties
Stock and Flow of Sale Properties


SNAPSHOT:

Snapshot of Asking Prices Nationwide
Snapshot of Asking Prices Nationwide

Discuss This Article

  • Re: The Daft Sale Report Q1 2013

    Posted By: Frank Walsh Date: Tuesday April 2, 2013 @08:49AM

    i remember in 1995 standing in line hoping to be lucky enought to be get a three bedroom new build house in obelisk court blackrock for 87,000 punts . no one then was hoping to make money from capital growth , we thought the price would acutally go down.....what drove the market was lack of supply in south dublin for 3 bed houses ... this was the start of the boom........there was simply not enought housing being build...after years of no supply ....this will happen again.. its just waiting for the euro wide economy to pick up. The lack of housing starts will bit in the next two years at that stage we will have been in " no build mode" for 7 years. The population continues to increase and yet our housing stock in mainly in the one and two bed apartments .... rents will continue to rise and hence yields and ROI will be attractive to investors

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  • Re: The Daft Sale Report Q1 2013

    Posted By: RoadSweepr Date: Tuesday April 2, 2013 @01:40PM

    You are omitting various differing factors which exist now but didn't in 1995:
    Whilst it is true that there are 'not enough houses in Dublin' as there were not enough quality houses in 1995, the changing landscape between 1995 and 2013 has meant that houses are currently overvalued nationally and in Dublin (despite the prices going up in Dublin at this moment in time).

    If the only thing fuelling house prices in Dublin is that there are 'not enough houses' , and buyers return to the old behaviour of 'buy now before its too late syndrome' this will lead to a second mini bubble, assuming that unemplyment nationally will remain high for the next few years, and that interest rates will go up. Interest rates will go up maybe not before 2015 but when they go up the situationi changes significantly

    If evictions rise and interest rates rise people will not pay 'silly money' for a house iin dublin. As for outside Dublin well its more like the apocalpse

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  • Re: The Daft Sale Report Q1 2013

    Posted By: Des Date: Tuesday April 23, 2013 @10:07AM

    Interesting analysis, but, is there really evidence that the population is growing? I am just seeing increasing reports of young adults of house buying and family starting age emigrating. Jobs market is at best stable, and cannot absorb new graduates. I fear that the supply shortage hinted at is an illusion, just as the "soft landing" was a figment of the imagination. A 1% rise in asking prices is like a first swallow not making a summer.

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  • Re: The Daft Sale Report Q1 2013

    Posted By: Diego Date: Tuesday April 2, 2013 @02:58PM

    I still think that Irish properties are way overpriced, for what they offer (both in terms of the property itself, and the services around them). I remember reading a report in 2008, stating that not a single property on the entire island was worth more than a million, and I strongly believe it was right. I have see dozens of them, but not one for which I would pay the asking price. They are simply not worth it.

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  • Re: The Daft Sale Report Q1 2013

    Posted By: James Date: Wednesday April 3, 2013 @09:28AM

    In relation to both the wider economy and the housing market it can be difficult to see an upside in the short-term when such negative data-flow continues to wash over us. Overall I remain very positive on the medium-term outlook for the Irish economy. Once the current housing correction is behind us and international credit markets return to some form of normality, the evidence supporting the ESRI view of near 4% trend growth in the economy is compelling. The housing market correction is already well advanced as housing starts have reacted swiftly to over-supply and stock levels in much of the country could clear fairly rapidly once confidence returns to the market. I suspect we will hear a few more terror inducing headlines from RTE before the end of this year but as we look into 2013 a moderation in world oil prices and subsequent reductions borrowing costs could be the kick-start that the Irish housing market desperately needs

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  • Re: The Daft Sale Report Q1 2013

    Posted By: Anonymous Poster Date: Thursday April 25, 2013 @10:41AM

    My father, god rest him, had a great saying which I am passing on to the author and those who believe house prices will recover.

    "If you tell yourself something often enough, you'll start to believe it's true"

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  • Re: The Daft Sale Report Q1 2013

    Posted By: Realist Date: Friday April 26, 2013 @03:07PM

    You have a strange situation in this country whereby record low ECB rates are contributing to a lack of supply coming onto the market (via people unwilling / unable to get out of tracker mortgages - vast majority of loans / investment BTL taken out in the boom), thereby leading to inaccurate price discovery process for the market in general via lack of supply. Therefore I believe there will be a slow grinding process of price declines for some time, while all new mortgages are financed at higher varaible mortgage rates (AIB up 0.4% the other day). If we had a proper functioning government bond market / sovereign, breaking the linkage between state and banks, banks fully and properly funded and the ability to take out long term loans (30 year trem) at circa 3% interest rates ala Germany / US, it would revive the housing market / economy - but I fear we are a long way from such a reality

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  • Re: The Daft Sale Report Q1 2013

    Posted By: Anonymous Poster Date: Thursday May 2, 2013 @02:13PM

    Report says that Average Asking Price for 1bed in South City is 118.216Eur: is this correct? How is that figure calculated? Tks

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  • Re: The Daft Sale Report Q1 2013

    Posted By: Aidan Date: Tuesday July 2, 2013 @12:47PM

    I'm no economist, but house prices that some report on are going up in price in Dublin is just giving a false indicator of how the economy really is and should not indicate signs of positive growth of the economy as a whole. Furthermore, Minister Noonan is using these so called rises to indicate confidence, giving a false reading that his government is improving the fiscal crises. If prices are rising because of lack of stock only, then frankly he is sending out false messages.

    The reality is there is no job creation and this impacts on how future growth. If the situation was that positive then why does the Government have to continue with its austerity budgets until 2015, cutting spending and raising taxes after the bailout ends later this year.

    House prices are still overvalued in Dublin and elsewhere in Ireland and no doubt could create a mini bubble in places. Estate agents could fuel this which doesn't help matters.

    I have been hearing that investors are buying stock and this as we know in the past fueled price rises. If the banks are giving favorable interest rates to investors, then this only compounds this situation. I do not want to see any mini bubbles or any bubble for that matter because I am trying to buy a small and modest house in Dublin. However, I am feeling the threat of not buying a home because of the mistakes of the past are creeping back like an unregulated housing market, investor speculation and mindset for owning property at any cost.

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  • Re: The Daft Sale Report Q1 2013

    Posted By: Dave Casey Date: Thursday January 7, 2016 @02:07PM

    Hi, could you please tell me the price of houses in carralackey, Kilmovee, Co Mayo. In 2013.
    Thank you

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