Wednesday, June 24, 2020

Housing Prices and Quantities in Q1 2020

There are lots of way Ireland’s dysfunctional housing system can be illustrated.  The 66 per cent increase in private rents since 2012 is as good as place to start as any.  Looking at recent data for the CSO shows that this increase stalled in September 2019.

Private Rents Index 2017 to 2020

In the Consumer Price Index, private rents in March 2020 were pretty much at the same level they were in September 2019.  There has since been modest falls in April and May.

For purchases, the levelling off of prices goes back a bit further.  Prices in March 2020 were essentially the same as they were in September 2018.

House Price Index 2017 to 2020

There is no judgement on appropriateness but it is worth noting that the past year or so has been the only time since the CSO’s house price series began that the annual rate of house price inflation has recorded a sequence of outturns close to zero

House Price Annual Inflation 2006 to 2020

We have a few more years of data for ‘private rents’ from the CSO and going back to 2003 these have never managed a period where the annual rate of change has been close to zero for any sustained period.

Private Rents Annual Inflation 2003 to 2020

On the quantity side, housing completions reached 21,000 units in 2019 up from just 5,000 in 2013 with most of the increases arising from scheme houses.

House Completions Annual 2011 to 2019

Commencement notices lodged with local authorities had reach an annual level of 26,000 units by the end of last year.

Housing Commencement Notices 2017 to 2019

And to conclude here are the number of mortgage drawdowns by first-time buyers.

Mortgage Drawdowns by FTB to Q1 2020

On an annual basis, the number of mortgages drawn down by first-time buyers reached 22,000 in Q1 2020.  Of these, 15,000 were for existing properties and 7,000 were for new builds.  First-time buyers have been drawing down more loans for secondhand properties compared to new properties since early 2009.

Of course, the housing sector is more than just private rentals and owner-occupiers.  Unlike private rents, local authority rents have not plateaued and continue to rise.

LA Rents Index 2010 to 2020

This isn’t a surprise as local authority rents are linked to the income of the tenants.  On the quantity side we can look at government capital spending on social housing (though only up to 2018 in this data).

Social Housing Spending GFCF 2000-2018

Ireland is pretty much the only country in the EU15 where the government sector does capital formation for social housing.  It was less than €150 million per annum from 2012 to 2014 but had risen to reach €600 million by 2018.  Other EU15 governments do support capital spending on housing but typically it is through investment grants to entities outside the government sector.

It is hard to know what the COVID19 crisis will bring for Ireland’s housing sector but that’s a few snapshots of where it stood as the crisis developed.

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