House Prices in 2011 – the predictions
January 5, 2011 by namawinelake
This week sees a raft of statistics on asking prices of residential property in the State for the last three months of 2010 (DAFT.ie, Myhome.ie and Sherry Fitzgerald). By the end of January 2011, the only hedonic transaction price series (Permanent TSB/ESRI) will be published in respect of the last quarter – the PTSB now appears to control less than 5% of the mortgage market and the series excludes cash sales. And in July 2011, we will get average new and second-hand house prices for 2010 from the Department of the Environment, Housing and Local Government – this series is not hedonic and regards a €57m sale on Shrewsbury Road as one sale and a €50,000 sale in Ballyfermot and you get the average price by dividing €57.05m by 2! And whilst you could argue that an asking price index is valid because it compares apples with apples over different periods of time, you could also argue that in a bust property market, the difference between asking and settled prices will be greater than during a boom. Those of you looking out for the House Price Database promised in August 2010 by the outgoing Minister for Justice and Law Reform, Dermot Ahern, you’ll be disappointed by the fact that the Minister failed to introduce the necessary amendment to the Property Services (Regulation) Bill in the last Dail session – perhaps the Minister is more pre-occupied with how he will spend the estimated €308,000 he will receive in his first year after retiring as a TD.
So for what it’s worth, this is the summary of what each of the three just-published asking price series tells us – in summary the pace of decline picked up in Q4 2010.
Track is kept on here of pronouncements on future house prices and below is the latest position (no-one seems prepared to stick their heads above the parapets since October 2010). You can find the sources for the information in the comments available in the attached spreadsheet. You should note that these pronouncements can be predictions or projections (the difference? A projection is “if condition X comes about then prices will change by y%”).
And for the little it’s worth, the prediction on here is that prices will drop 5% in 2011 by reference to the very limited PTSB house price series. Again for the little it’s worth, the feeling here is that settled prices are down 50%+ whereas the PTSB say they’re down 36% from peak. The following will tend to depress prices
(a) Continuing difficulty in accessing credit for mortgages – 14,000 mortgages were approved in the first three quarters of 2010, down from nearly 80,000 in the same period in 2005. And remember our banks are required to undertake a massive “deleveraging” exercise in the next three years and stopping new lending will be in keeping with the plan.
(b) Increasing stamp duty to 1% for first time buyers and for property less than 125 m2
(c) NAMA’s plan to bring property on to the market at “teaser rates”
(d) Population which is stagnant and may even decline. Dublin’s population fell by 0.3% in the year to the end of April 2010. Net outward migration will offset natural population growth.
(e) Repossessions and foreclosures should increase this year and non-NAMA banks seem increasingly keen to dispose of property
(f) Flat or falling wage levels, higher taxes, anaemic economic growth, positive inflation
(g) An overhang in supply. Whether it’s 30,000 or 150,000, it’s substantial
The following will tend to boost prices
(a) Reducing stamp duty from 7/9% to 1% for movers
(b) A sharp decline in new home construction – in the first 10 months of 2010 (pg 11 of the December 2010 Department of Finance monthly review), a total of 11,974 dwellings were completed. The outlook for 2011 is for less construction.
(c) Wealth and income in some pockets of the economy – certain parts of our economy are doing well (and not just within the NAMA sphere of influence!).