Tuesday, April 2, 2013

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?

6 comments:

Anonymous said...

I enjoy your posts but am beginning to wonder if you are one of those guys that is always negative rather than prescient in a negative market.

Consider the following, if houses rally increase in the next year or so will I be reading a headline from you saying 'Dont be fooled, houses still 40% below the peak' as opposed to ' Should have bought a year ago'... same could be applied to bank stocks today, a subject I havent seen you mention in a while. They have doubled as Wilbur Ross and his mates bought it.... is it wise to say 'Ah hah, but look how low they are compared to their 12 euro high!' or 'We appear to be building a base with good international support where the position of the banks is now widely known as opposed to knowledge in 2006'?

TrueEconomics said...

Keep wondering - it's the best prescription from falling asleep.

TrueEconomics said...

Ah, forgot - on banks shares. I do not recommend or assess Irish shares. Full stop. I do not want to assume responsibility for promoting a niche market with low liquidity and even lower transparency in an environment where Irish investors already have hugely home-biased portfolios.

Furthermore, if you 'keep reading' as you say, you would notice that I do not provide ANY investment advice on ANY asset class or asset.

TrueEconomics said...

You note keeps giving - no it is not 'better to say'. We know more about the banks than in 2006. That is correct. But we do not have 'broad international support' on foot of two investors bottom-fishing into BofI. Incidentally, us having 'broad international support' is neither necessary, nor sufficient condition for economic success. Us having a real economy not muddied by delusional thinking about our greatness (compared to peak or compared to trough) is.

Anonymous said...

Ah, this reminds me of the strategist who is always negative but insulates himself from future criticism when things recover by saying he never made any specific predictions.

However, anyone reading your work would find it hard to see anything but extremely negative market calls for all things Irish.

I respect your work in that as an Misesian/Hayekian minded investment banker working in Ireland we shared the same views re the Celtic tiger but maybe we differ on how much has already been discounted in certain prices locally and how much to care about what the local press say. I can assure you the foreign investors in Ireland pay little attention to the Irish press or the politicians. They just look at the numbers and try to second guess how much has been discounted versus fundamentals (yes yes they are bad but we all know this) and how much implicit or direct support (fair or unfair as it may be) they will get from ECB or taxpayers.

TrueEconomics said...

You will find no disagreement from my side to the second part of you comment. However, I do not work for foreign investors in Ireland. If I were, I would have been focusing on different aspects in my analysis.

Per 'local press' - tbh, I only care because it is annoying to have to attempt all of the time righten the ship after some careless passengers throw a party amidst the storm...