article published today in the Economic and Social Research
Institute's (ESRI) latest Quarterly Economic Commentary updates earlier analyses
of Irish house price movements. 'Bubble, Bubble, Toil and Trouble,'
[pdf] by Dr Kieran
McQuinn, shows that Irish house prices at end of December 2013 were
undervalued by up to 27%, and in the absence of a significant housing supply
response, are likely to continue to increase in the coming years.
The paper says Irish house
prices still appeared to be undervalued at end
with estimates of the
undervaluation varying between 12 and 27%. The latter result is estimated
with a model which places a significant emphasis on nominal interest rates.
Excluding this specification suggests that the current rate of undervaluation at
end 2013 in the market is in the range of 12 to 18%.
In a comparison of house prices with disposable income with other countries,
McQuinn says: "Up to 1995 the Irish ratio was the lowest across the countries
included and thereafter began to rise sharply as house prices increased. By 2007
both Spain and the UK had ratios which were broadly in line with the Irish rate;
the Irish rate fell by a greater degree up to 2012 suggesting that Irish
house prices became increasingly affordable by international standards."
Irish data used in a Dallas Federal Reserve Bank database is a hybrid of CSO
and Department of Environment house price data.
Both data sets are derived from mortgage lending
which in 2013 was
at a 40-year low.
Last month Cathal Mac Coille, chief economist at
Davy, said that cash buyers currently account for 50% of the Irish
Mac Coille also commented on the Dublin factor -
- County Dublin has 28% of the total population:
Our analysis of the Irish
property price register indicates that 23% of transactions in
Dublin so far
in 2014 were above the
up from 16.5% of transactions in
indicative of the frothy nature of the market.
But liquidity is little better in
Dublin, with transactions accounting for 0.9% of the housing stock in H1
r once every
528,000 of the
total Irish housing stock of 2
New mortgage lending for house purchase was just €539m in Q1
of which €263m was
the lack of mortgage
lending relates to the lack of properties on the market
and competition from cash buyers.
evident in the growing gap between mortgage approvals
and actual lending.
buyers account for around 50% of residential
Daft.ie reported last month that the average
asking price for houses on sale in South Dublin County was €442,500 - - a
level above pre-bubble times.
According to Dallas Fed data, the Irish
price/income ratio rose by 174% in the period 1995-2007 while it fell by 59% in
the period 2007-2013.
We noted last May that according to the official Residential
houses on Glasnevin Avenue were already fetching €400,000+ and a plain 2 bed
apartment in Sandymount Avenue in South Dublin fetched €375,000 - - 10 times average gross
According to a survey by Douglas Newman Good, the
average cost of a Dublin home stood at €349,000 at end June, a rise of €6,666 per month
since the beginning of April, or €71,000 since June 2013.
MyHome.ie's mix adjusted asking price nationally
in Q2 was €190,000 versus €255,000 in Dublin.
The latest University of Ulster Quarterly House
Price Index covering April, May and June showed that the average house price was
In May 2014, the Office for National Statistics
said London continues to be the English region with the highest average house
price at £492,000 and the North East had the lowest average house price at
£150,000. London, the South East and the East all had prices higher than the UK
average price of £262,000.
Excluding London and the South East, the average UK mix-adjusted house price was
The ONS said the average UK mix-adjusted house
price in May 2014 was £262,000.
However, June data from the UK's Land Registry's
House Price Index (includes all residential transactions including buy-to-let)
shows an annual price increase of 6.4% which takes the
average property value in England and Wales to £172,011 (€216,000).
The Institute for Fiscal Studies explains
here [pdf] the methodology of the four main UK housing indices.
an OECD study [pdf] this year, compared with a price to income ratio base of
100, Ireland was at 92; Germany at 83; UK at 125 and Spain at 104.
With 470,000 people in receipt of
employment-related welfare at the end of July and the two-thirds of the private
sector workforce in SMEs, it's going to be a challenge for many people to get a
mortgage in coming years.
Dublin Housing Crisis: 75 item laundry list doesn't make a