What the geography of house price rises tells us

Ronan Lyons, Economist

7th Apr 2015

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

What the geography of house price rises tells us

Having trumped expectations by falling across the country in late 2014, asking prices again sprung a surprise by rising strongly in the first three months of 2015. This was not a blip either, with prices rising strongly in all 35 regional markets analysed in the Daft.ie Report. The rise of 4.6% nationally more than offset the 1% fall in the final quarter of 2014 and is in line with the types of increase seen earlier in 2014 (which averaged 4.5%). A similar picture emerged from an analysis of Property Price Register transactions, with prices rising.

Can we assume, then, that the final three months of 2014 were an aberration and that the market has bounced back to “business as usual” with double-digit increases in prices in store for 2015? There are three reasons to think that this is not the case. Firstly, there may be some element of a “sigh of relief” as the Central Bank chose not to require a 20% deposit of first-time buyers, particularly in lower-price areas. This was the expectation in November but is now no longer the case and should be reflected in a one-off increase in average prices, rather than back to “business as usual”. With the new mortgage rules, house prices in the aggregate can in the future only grow as fast as incomes are growing, thus it is incredibly unlikely Dublin in particular will see a return to double-digit price increases.

Three in Five Homes Sell Within Four Months

Secondly, the fact that mortgage caps have indeed come in, albeit somewhat differently than expected, means that those with mortgage approval from before the regulations have a strong incentive to purchase before their approval runs out. This means that the first half of 2015 will contain some element of a rush in “old demand”. As it happens, this rush may be unnecessary, as the Central Bank’s relaxation of its minimum deposit requirements means that lending will be largely fixed in the pattern seen in 2014, in terms of the deposit and income multiples sought by banks across their loan-books as a whole.

Lastly, the housing market that has emerged since the start of 2015 is very different to the one that existed before September last year, when the Central Bank rules were first mooted. To see how, compare price growth in Dublin versus those outside the capital. The first quarter of 2015 was the first time in a long time that ex-Dublin prices rose by more than those in the capital. The contrast is stark also, with ex-Dublin prices seeing twice the increase (6% vs. 3%).

It could be argued that this would have happened anyway, as the price increases seen in Dublin since 2012 belatedly spread to other parts of the country. However, its rapidity and severity – Munster saw its largest three-month increase since early 2007 – plus the fact that increases were larger in Meath and Kildare than in other Leinster counties suggests something else. Compared to incomes, house prices are much higher in Dublin than elsewhere. This suggests that simple nationwide loan-to-income caps will shift demand from Dublin to the rest of the country.

Another way of measuring conditions in the housing market is to examine the difference between the asking price of a property and its ultimate transaction price. Particularly given Ireland’s unique lack of a postcode system, this requires a bit of effort to compile valid matches across the archive of online ads and the Property Price Register records. Nonetheless, it has been possible to build a sample of over 16,000 homes matched across listings and transaction archives since 2010 – with a roughly 50-50 split between Dublin and elsewhere. The average gap, for both Dublin and the rest of the country, is shown in the graph below, from the start of 2010 to the first quarter of 2015.

Most Expensive Areas

What it shows is not the gap at any given point in time between the listed price online and transaction prices, which are very highly correlated, but rather how the final transaction price compared with the initial asking price. This is a price that may have been set a number of months beforehand.

What the figure does show is that market conditions certainly turned between 2012 and 2014 in Dublin. In mid-2012, a transaction being concluded at that point in time had a price 10% lower than the initial advertised price. By mid-2014, the transaction price was 7% above the list price. In late 2014 and early 2015, however, that gap has halved. In the rest of the country, transaction prices now are only beginning to creep above the listed price.

Adding to our armoury of housing market metrics like this will help policymakers, analysts and academics as they monitor the health of our housing market. With credit largely under control, the focus now has to be on addressing the social housing system and the cost of building a home.

Map of House Prices in Ireland

Discuss This Article

  • Re: The Daft House Price Report Q1 2015

    Posted By: Anonymous Poster Date: Tuesday April 7, 2015 @08:11AM

    I see from the report that the asking price has increased nationwide in the first 3 months of 2015.
    Is this because estate agents have decided that prices should increase and are trying to fuel a new property boom? They have got in wrong before!!
    Have the ACTUAL sale prices increased in the first 3 months and if so, by how much. After all this will be a more accurate reflection of what is happening?

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  • Re: The Daft House Price Report Q1 2015

    Posted By: David Date: Tuesday April 7, 2015 @10:20AM

    If you read page 3 of the report you will see that they carried out an nalayis of this based on 16,000 sales and that actual sale prices are exceeding asking prices.

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  • Re: The Daft House Price Report Q1 2015

    Posted By: Anthony Miller Date: Tuesday April 14, 2015 @06:14PM

    I think the government have been interacting with auctioneers to increase house prices. why you may say.Well i believe in 2016 there is a re- evaluation of our property tax.Higher the house price the more tax.

    I may be wrong just a thought.

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  • Re: The Daft House Price Report Q1 2015

    Posted By: McQuiaid Date: Saturday April 18, 2015 @08:33AM

    DAft.ie always talk about increasing house prices as its better for business for Daft however all notification email I get daily show a reduction in the asking price for houses in south Dublin. the information I get form the daily report contradicts what you are reporting here.

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  • Re: The Daft House Price Report Q1 2015

    Posted By: john 55 Date: Tuesday April 7, 2015 @11:03AM


    Could this be that supply has increased in Dublin in particular. I see that there is over 4000 properties for sale now in the Dublin area (and is growing) this is up from just over 3000 in the latter half of 2014. In North Dublin supply has increased from 6-700 to over 1000 properties (and is growing) therefore giving a larger average price due to a larger quatities of properties?

    Supply seems to be increasing and with new regulations which will be in full effect by mid 2015 I cannot see that prices can rise with LTV rates set at 3.5 and lower incomes, high deposits and excessive rents.
    Also with reposessions about to ramp up supply can only increase, whatever side of the market you are on this is either a good or bad thing.

    Also the prospect of interest rate increases means rising prices will only result in more defaults. This may not come for a few years but as a mortgage is not a short term thing it will have extreme effects on higher mortgages in time and the cycle of boom to bust/mortgage defaults will continue.

    Banks need to take more responsibility for reckless lending and share the hit and not leave the pain to mortage holders who cannot afford to pay mortgages also Bankruptcy laws need to be changed in this country to allow people to default, clear their debts with dual responsibilty with the banks and allow then to start again within a short period of time rather than the crazy system which now exists.

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  • Re: The Daft House Price Report Q1 2015

    Posted By: Chris Date: Tuesday April 7, 2015 @11:05AM

    As a FTB currently looking to buy in the South Dublin Area, it would appear that the asking price is reasonably reflective of the ultimate sale price obtained.

    I've looked at a few houses that since went sale agreed and the asking prices were within 10 to 15K of the sale price. This is much different from previous times, both in the boom and the bust.

    This is giving me confidence when looking that I can base my house viewings based on based on asking prices against my budget and not have to look at houses priced well below my budget because houses are selling for higher or vice versa.

    Just my personal experience.

    The country has long needed this to come into the property market.

    The real question is whether this is a sign of things to come in the industry or whether this is a short term reaction to the bank lending requirements.

    Time will tell. Wonder what will be commented on in 6 months time?

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  • Re: The Daft House Price Report Q1 2015

    Posted By: Hmmmmself Date: Tuesday April 7, 2015 @11:43AM

    So much more nuanced than the MyHome report which only focused (as far as I could see) on asking prices. Very interesting to see the actual sales prices and the graph comparing asking and sales.
    (I'm just a reader and potential FTB; no other interest to declare)

    Even though the gap between the size of mortgages approved before the new Central Bank rules and the amount of credit available under the new regulations is not huge, you are right that there is still a bit of panic for buyers with 'use-it-or-lose' approvals running out in the summer.

    This should keep things moving nicely for a couple more months but after that new rules will be fully in effect and prices should be much more closely linked to incomes. (Okay, pretty much what the report says/implies but worth summarising for lazy readers!)

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  • Re: The Daft House Price Report Q1 2015

    Posted By: Anna Date: Friday April 10, 2015 @10:28PM

    The house prices of Q1 of 2015 both in Dublin and outside were lower than in the late 2014 according to cso.ie. This means that decrease in price rather than increase..

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  • Re: The Daft House Price Report Q1 2015

    Posted By: Sm Date: Tuesday April 14, 2015 @07:47PM

    Longford price increase on page 6 says 14% - on page 16 you say 9% ???

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  • Re: The Daft House Price Report Q1 2015

    Posted By: adi Date: Friday April 17, 2015 @10:29PM

    hi all. Real facts while i searched for a house to buy. asking price 150 000. sal agreed 162000. asking 170000 going over with bids 196000+. so on.

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  • Re: The Daft House Price Report Q1 2015

    Posted By: TG Date: Sunday April 19, 2015 @10:04AM

    Foremost, we need to understand how and who does the valuations on property, mostly this is performed by greedy misguided bankers who have no real clue about anything but thieving from the public. All they use is spreadsheet statistics put together by kids in some back office, then they send out auctioneers to do visual checks, what a joke, these lot also have practically zero hands on experience and only interested in making fees too.
    People should be wary of trusting valuations made by any of this crowd. Just a few years ago they priced my house at 220k now it's 139k according to their so-called professional opinion. Another point is, how can a car built by robots in a mass produced factory be worth more than a house that real people live in. Property values are what people are willing to pay for somewhere for them and their family to live. There has been too much market speculation, buy, sell by greedy people too....for goodness sake stop peculating and live in your house...........valuation is what you get out of in real life and living, not investment for financial reward.

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  • Re: The Daft House Price Report Q1 2015

    Posted By: Anonymous Poster Date: Wednesday April 29, 2015 @01:54PM

    property prices will rise but not by 300%, the next price crash will be 2016, but not as bad as the last one, prices will keep rising until then

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  • Re: The Daft House Price Report Q1 2015

    Posted By: Anonymous Poster Date: Wednesday April 29, 2015 @02:57PM

    The true value of a house is not really what it's worth, it's what somebody is willing to buy for it.

    You can worry about the value of your house all you want but it only really becomes an issue when you want to move or you can't pay a mortgage. In all other instances, it's just a fictitious number.

    A gentleman early noted that his house was valued at 220K and now it is 139K. In my opinion, that is based on market appetite. A few years ago, someone would give him 220K for that property. Now that hunger is less and so the "value" goes down. It's like currency. You have the same number of euros in your bank account, but like it is now, the dollar is stronger so the value of your euros is less. This gentleman still has the same house whether it's worth 139K or 1.39million. It only makes a difference as I said if you want to move or if you have mortgage difficulties and the bank are looking for the keys back.

    The market seems to levelling somewhat. I remember a time before the bust that if you offered on a property, you had to get that sale agreed ASAP or the value would go up yet again. In the crash, you had to sell as soon as you could before the value went down further. Late 2014 saw an increase in house prices generally, definitely in Dublin, but this is levelling.

    As a FTB looking to finally buy, I'm more confident now that when I look at a property "valued" at 300K, I shouldn't be offering 350K to make sure, but I also know there's no point offering 250K in case I over pay.

    Enjoy to temporary stability in the market, I'm sure the country will find a way to fudge it up again soon :)

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