23/7/2013: Irish Residential Property Prices: June 2013

Irish Residential Property Price Index (RPPI) is out today with latest figures for June 2013 offering a snapshot on H1 and Q2 activity in the sector, with some encouraging signs.

From the top line data: the overall property price index has managed to post the first annual increase in June since January 2008. However, overall trend in overall index remains flat, as established from Q2 2012.

• Year on year, RPPI was up 1.23% in June, having posted -1.07% growth in May 2013.
• 3mo cumulated change through June 2013 was at 2.34% and this contrasts +0.62% rise in 3 months through May 2013.
• 6mo cumulated change remains negative at -.03%, but much shallower than -1.97 6mo cumulated change through May 2013.
• M/m June rise of 1.23% was the largest m/m move up since September 2007.
• However, on 3mo MA basis, the index June reading was 65.0 - still below the levels recorded in February 2013.
• Relative to peak the index is down 49.73%, the best reading since December 2012. However, the RPPI is only 2.34% above the all-time low.

Top-line conclusion: RPPI is struggling to lift up above the flat trend despite the unprecedented level of prices collapse to-date.

Chart to illustrate the above trends:

Apartments drove the overall index up on a m/m basis and largely accounted for much of change y/y. The problem is that apartments index is based on thin data, so it is subject to much volatility.

• Houses RPPI was up 0.89% y/y in June, having posted a y.y contraction of -0.88% in May. M/m index rose 0.89%.
• 3mo cumulated increase in Houses RPPI was 2.10% in June against a rise of 0.9% in May.
• 6mo cumulated move in Houses RPPI remains negative at -0.73% - a moderation on -2.17% contraction in May.
• 3mo MA through June is 67.7, which is the best 3mo MA reading since February 2013 (67.93).
• Relative to peak, Houses RPPI is down 48.3% and current index reading is only 2.1% above the all-time low.
• Apartments RPPI reached 50.1 in June 2013, up 5.25% y/y and this contrast in the index being down 3.09% y/y in May 2013. M/m June move stood at +6.37%.
• 3mo cumulated change through June 2013 stood at +4.59% a strong reversal on -8.54% 3mo cumulated fall in May 2013.
• 6mo cumulated rise in June stood at 6.82% against 6mo cumulated rise of 3.06% in May 2013.
• Current reading of the index is 59.56% below the peak and is 9.53% ahead of the absolute low.
• However, Apartments RPPI STDEV during the crisis period has been at 23.5 against 20.3 for Houses Index. And STDEV for m/m changes was 2.36 for Apartments, against 0.84 for Houses.
• 3mo MA for Apartments index reached 48.53 in June 2013, which is above May 3mo MA, but below April.

Chart below illustrates Apartments and Houses indices trends:

Top line conclusions: Again, the flat trend remains for the houses index and there is a slight upward trend for the apartments. Both series are relatively anaemic, despite the positive moves. High volatility in Apartments index suggests that caution should be used in interpreting overall RPPI data short-term moves.

Dublin RPPI:

• Dublin RPPI rose 4.15% y/y in June 2013, having posted a rise of 1.37% y/y in May. June marks sixth consecutive month of increases in Dublin RPPI (y/y terms).
• 3mo cumulated change in June stood at 2.38% reversing the 3mo cumulated decline of -0.17% in May 2013.
• 6mo cumulated increase in June was 1.69%, reversing a -1.33% 6mo cumulated drop in may.
• Relative to peak, Dublin RPPI is now down 55.24% and relative to absolute low the index is up only 5.06%.
• 3mo MA at 59.43 in June 2013 is the best 3mo MA reading since January 2013.
• Against the peak, current reading brings us back to the levels last seen in December 2011-January 2012.

Chart to illustrate:

Top line conclusions:  Dublin RPPI is showing most significant and lasting gains of all sub-indices, backed also by medium-range volatility (STDEV for m/m changes is 1.38 for Dublin RPPI).

How significant was the skew in All Properties RPPI due to movements in Apartments? Very significant. 

• All RPPI was up 1.2% y/y in June 2013
• National Houses RPPI was up 0.9%
• National Apartments RPPI was up 5.3%
• Ex-Dublin, All RPPI was down -1.0%, Ex-Dublin Houses RPPI was down 0.9% (close to All RPPI ex-Dublin)
• Dublin All RPPI was up 4.2% with Dublin Houses RPPI up 3.6% and Dublin Apartments RPPI up 9.7%.

Hence, overall RPPI was strongly pushed up by Apartments and Apartments index was pushed up by Dublin Apartments.

29/6/2013: Nama valuations update to May 2013

In the previous post I looked at the latest prices trends in Irish property markets. Now, as promised, an update on Nama valuations.

Note: these numbers are indicative, rather than exact estimates.

29/6/2013: Irish Residential Property Prices: May 2013

This week, CSO released Residential Property Price Index (RPPI) for May. Here's the update on trends and changes. Nama valuations update will be posted in a follow-up post.

Per CSO data, All properties RPPI rose marginally from 64.6 in April to 64.8 in May, 2013. The index is now in the range of 64.1-64.8 for four months in a row, suggesting no change to the overall flat trend at around 65.2. The flat is now running from February 2012, and we are currently below the trendline by about 0.6%.

Year on year, index is down 1.07% and in April it was down 1.22%. Over the last 3 months, All-RPPI rose 0.62% cumulatively, which reverses 1.22% loss on 3mo through April 2013. On 6mo basis, cumulative, All-RPPI is down 0.33% which is an improvement on 1.22 loss over 6 months through April 2013.

2013 is not shaping that great so far, as All-RPPI is down 1.52% since December 2012 end.

Overall, All-RPPI is down 50.34% on all-time peak and in May 2013 it was up only 1.09% on all-time low of 64.1 reached in March 2013.

Houses sub-index rose from 67.3 in April 2013 to 67.6 in May - another marginal improvement. Y/y index is down 0.88% and in April it was down 1.17%. 3mo cumulated gain through May 2013 was 0.9% and there was a 6mo cumulated loss of 2.17%. Relative to peak, the series are down 48.79% and the sub-index is 1.2% above the all-time low.

Per chart above, Apartments sub-index is again in decline, falling from 48.4 in April 2013 to 47.1 in May. Y/y sub-index is down 3.09% and previous y/y decline was 2.42%. 3mo cumulative move in May 2013 was -8.54%, while on 6mo basis, the index is up 3.06%. There is huge volatility in the index by historical standards, which suggests that the market is subject to some very concentrated volume swings in sales.

Dublin sub-index has been used before to drum up the evidence that Irish property markets are returning to life. Chart below shows a marginal positive sloping of the trend since the historic lows of H1 2012.

However, at 59.2, May reading came in only marginally better than 58.9 in April 2013. Year on year, Dublin sub-index is up 1.37 and on cumulated 3mo basis, May reading is down 0.17%. On cumulated 6mo basis, the decline is -1.33% through May. There is zero gain since the end of December 2012. 6mo average reading is now 59.2 - bang on with May 2013 reading. 12mo average is at 58.74, less than 0.8% away from the current reading. For all intent and purpose, current trend is flat at around 58.7-59.0 range. Overall, Dublin prices are down 55.99% on peak and are 3.32% up on absolute low.

14/6/2013: Scary table of the week: Irish Property Prices 'Recovery' Dating

Updating my databases, I came across an old exercise of estimating the property prices recovery paths for Ireland based on the CSO Residential Property Price Index. Here's an updated table of dates of expected recovery according to three basic scenarios:

There is virtually no point of repeating the same exercise for real values, albeit the closest this comes to such an attempt is Scenario 3.

All calculations are based on CSO data.

26/4/2013: Where's that 'recovery' thingy? Irish Residential Property Prices, March 2013

Various Irish ministers and Government 'analysts' have been on the media in recent months extolling the virtues of 'recovery'. In a society still obsessed with property prices, one of the key tenets of the 'recovery is upon us' proposition is the view that Irish property prices are rising once again usually followed by the claims that hordes of 'foreign investors' and 'domestic cash buyers' are fighting to get their hands on prized Irish properties.

Of course, a major point of internal contradiction for all these 'green jersey' claims is that if property prices are rising, then the cost of doing business in Ireland should be rising as well, just as the 'analysts' are claiming that it is falling, especially when it comes to rents and property costs. You see, one can't really have both: deflation in costs is incompatible with rising prices on assets underlying these costs.

Meanwhile, as usual with the Government's exhortations, reality has been having a mind of its own.

Latest numbers from CSO, covering the Residential Property Price Index for Ireland, show exactly how out of touch the folks peddling are.

All properties RPPI fell 3.03% y/y in March and this accelerated 2.57% y/y fall recorded in February. M/m property prices were down 0.47%, which is better than 1.59% m/m drop in February, but marks 4th consecutive month of monthly prices drops. Last time Irish residential property prices were up was in November 2012 and since then we have seen a cumulative decline in prices of 3.03%.

6mo cumulative decline in RPPI stands at 2.58% against previous 6mo cumulative drop of 1.23% and against average m/m drop over the last 6 months of 0.43%.

In fact, All Properties index has fallen to an all-time low in March 2013 despite numerous proclamations of recovery by the Government. Property prices are now down 50.88% on their peak and are statistically significantly below crisis period average.

The distance to 6mo MA line is now widening, which suggests that we might be in a medium-term secular change in trend downward from the previous trend that was just flat. As a note of caution: this remains to be confirmed over time.

House prices also hit an all-time low in March 2013 with index sliding 3.05% y/y, against 2.90% decline recorded in February, and 0.3% down on m/m basis. 3mo cumulated change is now -3.04%, 6mo cumulated change is at -2.77% and previous 6mo cumulated change was -1.47% so things are getting worse faster. House prices are now down 49.39% on peak.

Apartments prices have decline 1.44% in March on y/y basis, having posted 6.4% rise y/y in February. Monthly change in Apartments prices was -6.99%. 3mo cumulated change in prices is still +2.13%, with 6mo cumulated change of +2.13% down from previous 6mo cumulated change at +9.81%. Relative to peak, Apartments prices are running down 61.34% and relative to all-time low they are up just 4.81%.

Dublin prices were most often cited as showing significant gains in the current 'recovery'. These are still up 1.38% y/y in march, but they were up 2.95% y/y in February. Monthly drop in Dublin residential properties was -0.84% m/m and this marks second consecutive m/m drop. 3mo cumulated change in prices was -0.68% against -1.17% in previous 3mo period, 6mo cumulated change is now at +0.17% against +3.49% increase on previous 6mo period. Dublin prices are now down 56.28% on peak and are up 2.62% on absolute low.

In short, to conclude:

1. As I have maintained throughout recent months, Irish residential property prices are trending flat overall.
2. Flat trend is now being challenged to the downside, with some indications that it is turning to negative, though this requires more data to make any conclusion firm.
3. Prices are seeking some catalyst in the market and despite all the efforts by the Government to 'talk the talk' on recovery, there are no indications from the property market that such 'recovery' is anywhere in sight.

2/4/2013: Confused or spun? Property prices in Ireland

So foreign investors are allegedly flocking in thousands to Irish commercial real estate markets, snapping anything they can get their hands on... right
http://www.independent.ie/business/world/number-of-empty-office-buildings-soars-by-67pc-29167687.html

Meanwhile, of course, residential property is on a 'recovery path' (aka flat-line dead) per latest CSO figures for the Residential Property Price Index.


In February 2013, RPPI for all properties fell from 65.4 in January to 64.4 (a decline of 1.53% - the steepest rate of m/m drop since February 2012 and worse than the year-to-date average m/m decline of 1.07%). The index is now down 2.57% y/y.

Looking at slightly smoother 3mo figures: 3mo cumulative change on previous 3 months was -2.57% which signals acceleration in decline compared to 6mo change on previous 6 mo at -1.23%. Thus, relative to peak, RPPI hit absolute bottom at -50.65% with previous record drop of -50.34% recorded in June 2012.

The Government needs some serious spin to paint house prices dynamics in anything but bleak terms. Per RPPI, House prices are deteriorating, slipping to 67 in February 2013 from 68.1 in January 2013 and setting an all-time record low. House prices are down 1.62% m/m and 2.90% y/y. 3mo cumulated change is -3.04% and 6mo cumulated change is -1.47% so things are getting worse, not better, over time once again.

RPPI overall, however, was supported to the upside by the price changes in sub-index covering Apartments. Apartments prices sub-index rose to 51.5 in February from 48.1 in January (+7.07% m/m) which suggests that a single outlier transaction might have distorted the cumulative figures. Nonetheless, in terms of 3mo MA this only brings sub-index to the levels of May-June 2012.

Lastly, Dublin sub-index showed once again that flat-line can actually be associated with both down and up volatility. In February 2013 Dublin sub-index slipped to 59.3 from 59.5 in January, which means that the index is now up 2.95% y/y. Happy times? Somewhat. But note that 6mo cumulated change through February 2013 was at +3.49% while 3mo cumulated change through February is -1.17%, so dynamically things are worrisome, rather than encouraging.

Funny thing this recovery, folks... Government & Green Jerseys say one thing, their own data says another... confused.com? or maybe spin.ie?

30/3/2013: A simple, yet revealing, exercise in house prices

Based on the latest reading for the Irish Residential Property Price Index, I computed three scenarios for recovery, based on 3 basic assumptions of:

1. Steady state growth of 5% per annum in nominal terms (roughly inflation + 3% pa)
2. Steady state growth at the average rate of annual growth clocked during 2005-2007 period, and
3. Steady state growth at inflation + 1% pa

Note, Scenario 3 is the closest scenario consistent with the general evidence from around the world that over the long run, property returns are at or below inflation rates.

Table below summarises the dates by which we can expect to regain 2007 peak in nominal terms:

Yep, turning the corner (whenever we might do that) won't even be close to getting back into the 'game'...

28/2/2013: Boring, Boring Property Prices in January

When one is bored, truly deeply bored, it is hard to muster much strength to go through the twists and turns of the data. And I am bored, folks. Irish property prices data, released by CSO today, is simply equivalent to watching a fish flopping on hot asphalt - it is simply, clearly, obviously, patently... not going anywhere.

That is the story with the stats from Ireland nowadays - the flatline economy, punctuated by the occasional convulsion up or down.

Alas, to stay current we simply have to go through the numbers, don't we?

Let's first do a chart. Annual series for 2012 are finalised and were revised slightly down on the aggregate index compared to the previous release:

The chart clearly shows that despite all the talk about 'bottoming out' house prices, and 'buyers throwing deposits on unfinished homes' is a quasi-2006 frenzy, property prices in Ireland fell over the full year 2012.

Recall the prediction by some economists that property prices are likely to stabilise around -60% mark on peak? I made similar claim, but referencing in the medium term Dublin and larger urban areas, while stating that nationwide prices will be slower to react due to rural and smaller towns' property markets being effectively inactive. Guess what? Dublin prices were down 56.3% on peak in 2012. Not exactly that badly off the mark. Apartments prices - down 61.1% on peak. Exceeding the mark. Nationwide, properties were down 49.5% on peak, still some room to go, but in my view, we are still heading in the direction of 60% decline.

Now, onto monthly series.

Nationwide Property Prices: 

• All properties RPPI declined from 65.8 in December 2012 to 65.4 in January 2013 (down 0.61% m/m) and is down 3.25% y/y. 
• Despite all the 'stabilisation claims', overall RPPI has not posted a single month y/y increase since January 2008. 
• The 'good news' is that RPPI rate of decline (in y/y terms) has slowed down for the 9th consecutive month in January 2013.
• 3mo MA has been static now over the last 3 months at 65.77, which simply means that half of the gains that were made from the historical trough of 64.8 in June 2012 to the local peak of 66.1 attained in November 2012 were erased when the index fell to 65.8 in December. January rise is a tiny correction back up.
• Let's put this differently. January 2012 index returned us back exactly to the level of prices recorded in April 2012 and then repeated in October 2012. 
• The market is... lifeless. Irony has it: 3mo cumulated gains through December 2012 were exactly zero. 3mo cumulated change in the index through January 2012 is exactly zero.
• 6mo cumulative gains are more 'impressive' at +0.77%.
• But put this into perspective: this rate of 'growth' implies annualised rate of +0.878%. At this rate of annual expansion, the next time we shall see 2007 peak level prices for properties, expressed in nominal terms, will be 2092. 

Dublin:

• Prices in Dublin corrected slightly up in January to 59.5 from 59.2 in December 2012. Latest reading is still below 60.0 local peak recorded in November 2012, so the correction is so far very much partial.
• Y/y prices are now firmer at +2.06% in January, having posted -2.47% decline in December. January marked the first month that we had y/y increases in prices since November 2007.
• The rate of price increase in January in y/y terms, however, is basically solely correcting for inflation, which means that for anyone with a mortgage payable today, property 'wealth' is continuing to drop in real terms. Obviously, that is too far advanced of an analysis for the Government and its cheerleaders who think 2.06% increase in just one month over 62 months is a firm sign of a 'turnaround' or worse, 'recovery'.

Instead of boring you with the discussion of detailed stats on dynamics, here are the main charts:

 

All of the above show basic reality of an L-shaped 'recovery' we have been having to-date. May be, one might hope or one might dread, the prices will move up from here in a more robust fashion. Reality is - so far, they are not... When that reality changes, I will let you know.