House prices per Sq M

MG

I was in Germany last week and was looking in a few estate agent windows. One thing I’ve noticed in the past few years is that the price per Sq M has tended to be around the €1600 mark and this was again the case.

To satisfy my curiosity, I took a random sample of price and Sq M from immowelt.com. Sample was reasonably random, I tried to spread it geographically and include all the major population centres so it would be reasonably representative.

The result was approx €1680 per sq M.

Although the PSTB/ESRI index has stopped showing the 3 bed semi market, it has historically tracked the average house price to a reasonable degree. Assuming an average 3 bed semi is 100Sq M. and the average price peaked at 310k and is now in the 240k range, it suggests that Irish Sq M prices were up to €3100/m2 and are currently at about €2400/m2.

High level, this suggests house prices have a long way to fall yet.

bobbysands81

MG wrote: »

I was in Germany last week and was looking in a few estate agent windows. One thing I’ve noticed in the past few years is that the price per Sq M has tended to be around the €1600 mark and this was again the case.

To satisfy my curiosity, I took a random sample of price and Sq M from immowelt.com. Sample was reasonably random, I tried to spread it geographically and include all the major population centres so it would be reasonably representative.

The result was approx €1680 per sq M.

Although the PSTB/ESRI index has stopped showing the 3 bed semi market, it has historically tracked the average house price to a reasonable degree. Assuming an average 3 bed semi is 100Sq M. and the average price peaked at 310k and is now in the 240k range, it suggests that Irish Sq M prices were up to €3100/m2 and are currently at about €2400/m2.

High level, this suggests house prices have a long way to fall yet.

Apples and Oranges mate.

Is the cost of the site in the two countries comparable?
Is the cost of the labour comparable?
Is the cost of the raw materials comparable?

whizzbang

bobbysands81 wrote: »

Apples and Oranges mate.

Is the cost of the site in the two countries comparable?
Is the cost of the labour comparable?
Is the cost of the raw materials comparable?

Seems like a reasonable comparison to me. The fact that our land and labour were vastly over priced when a place was built does not really have an effect on what the place will sell for now. It makes no sense that our properties are still 50% more expensive than a vastly stronger and bigger economy.

D3PO

whizzbang wrote: »

Seems like a reasonable comparison to me. The fact that our land and labour were vastly over priced when a place was built does not really have an effect on what the place will sell for now. It makes no sense that our properties are still 50% more expensive than a vastly stronger and bigger economy.

I can buy a house in india for 15 grand is it comparitable with here ? No

I can buy a house in Donegal for less than dublin. Is it comparatible ? No

So why then would it be comparatible to measure irish house prices with those in germany ?

spockety

D3PO wrote: »

I can buy a house in india for 15 grand is it comparitable with here ? No

I can buy a house in Donegal for less than dublin. Is it comparatible ? No

So why then would it be comparatible to measure irish house prices with those in germany ?

Because based on just what you've said above, i.e. India < Ireland, Donegal < Dublin... where the hell do you think Ireland should be with respect to Germany?

Germany < Ireland?

Haha... gimme a break!

D3PO

spockety wrote: »

Because based on just what you've said above, i.e. India < Ireland, Donegal < Dublin... where the hell do you think Ireland should be with respect to Germany?

Germany < Ireland?

Haha... gimme a break!

so you have just proved my point Ireland is not equal to Germany therfore comparison is irrelevent

oceanclub

D3PO wrote: »

I can buy a house in india for 15 grand is it comparitable with here ? No

I can buy a house in Donegal for less than dublin. Is it comparatible ? No

So why then would it be comparatible to measure irish house prices with those in germany ?

Yes, because Ireland is to Germany as Germany is to India.

*bangs head off wall until the voices stop*

P.

MG

Perfectly reasonable comparison, two modern western economies with a comparable standard of living. Naturally there will be differences but nothing to justify a 90% difference (at the height of the boom) or a 50% difference at the moment.

In fact, it's more unreasonable to put forward the apples and oranges argument. One measure we can look at ts the Big Mac Index, and as I checked for a link I came accross this from David McWilliams
http://archives.tcm.ie/businesspost/2009/05/31/story42094.asp

"According to economic theory, the prices of Big Macs should be the same all over a monetary union. If they are more expensive in one place, prices must fall for that country to be competitive. Last Friday, in Berlin’s Zoo Station - which was made familiar to Irish ears by U2’s track on Achtung Baby, when the band captured the zeitgeist by recording the album in the city just after German reunification - a Big Mac cost €3.10.

In Dun Laoghaire - a place that has yet to capture the zeitgeist of anything - the same Big Mac cost €3.80.

Ireland’s Big Mac is 70 cent more expensive than Germany’s. Taking this as a percentage of the German Big Mac price implies that Irish prices are some 22 per cent above German prices. Therefore, taking the Big Mac index as our benchmark, if we want to become as competitive as Germany, our prices and wages have to fall by over 20 per cent."

Moreover, the Big Mac index shows the number of minutes worked in Dublin to purchases a big mac is 15mins, compared with 16mins in Germany.

Based on this a variation between German and Irish house prices per sq m may show some variability but 50% or more is not justifiable.

As cross check, do the rental multiplier check....take a 3 bed semi in Kildare renting for 900 per month . 900 x 11 x 16 = 158400 or apprx 1584 per sq/m.

bobbysands81

MG wrote: »

Perfectly reasonable comparison, two modern western economies with a comparable standard of living. Naturally there will be differences but nothing to justify a 90% difference (at the height of the boom) or a 50% difference at the moment.

In fact, it's more unreasonable to put forward the apples and oranges argument. One measure we can look at ts the Big Mac Index, and as I checked for a link I came accross this from David McWilliams
http://archives.tcm.ie/businesspost/2009/05/31/story42094.asp

"According to economic theory, the prices of Big Macs should be the same all over a monetary union. If they are more expensive in one place, prices must fall for that country to be competitive. Last Friday, in Berlin’s Zoo Station - which was made familiar to Irish ears by U2’s track on Achtung Baby, when the band captured the zeitgeist by recording the album in the city just after German reunification - a Big Mac cost €3.10.

In Dun Laoghaire - a place that has yet to capture the zeitgeist of anything - the same Big Mac cost €3.80.

Ireland’s Big Mac is 70 cent more expensive than Germany’s. Taking this as a percentage of the German Big Mac price implies that Irish prices are some 22 per cent above German prices. Therefore, taking the Big Mac index as our benchmark, if we want to become as competitive as Germany, our prices and wages have to fall by over 20 per cent."

Moreover, the Big Mac index shows the number of minutes worked in Dublin to purchases a big mac is 15mins, compared with 16mins in Germany.

Based on this a variation between German and Irish house prices per sq m may show some variability but 50% or more is not justifiable.

As cross check, do the rental multiplier check....take a 3 bed semi in Kildare renting for 900 per month . 900 x 11 x 16 = 158400 or apprx 1584 per sq/m.

That is one of the lamest arguments I've ever read!!!

Senna

bobbysands81 wrote: »

That is one of the lamest arguments I've ever read!!!

Its taking a small everyday item and making a comparison based on price in different countries, it has noting to do with a Bug Mac, only to prove a point. why is it lame?
Why is a product dearer here than in a more developed economy? If the price difference is because of higher wages, why are our wages higher?


There are any number of comparison, price per sqft, land value, average wage=average house cost etc. The answer will always come out the same, Irish property need to drop by about 70% peak to stable market.

JuliusCaesar

MG wrote: »

if we want to become as competitive as Germany, our prices and wages have to fall by over 20 per cent."

Don't see that happening.......

Of course if the huge earners (200K and above) took a 50% pay cut, that would bring our average earnings down.

Not going to happen - anymore than Irish bankers will be seen taken away to Mountjoy in manacles.

PS Germany's population is much more evenly spread out than the population here, with a third of the pop in Dublin and surrounds.

Imposter

MG wrote: »

As cross check, do the rental multiplier check....take a 3 bed semi in Kildare renting for 900 per month . 900 x 11 x 16 = 158400 or apprx 1584 per sq/m.

There are too many variables that are not taken into account. Such a formula works in Ireland as that is what is peddled as a fair rent.
Since I moved abroad I think Irish rents are way too high which leads to things like people having to house share even if they otherwise wouldn't. It also leads to situatinos in other countries where people have no problems renting long term!

I'll give you a comparison - I live in Austria which should be a lot more comparable to Ireland (in terms of population, big neighbour etc.) than Germany.
I rent a 50²m apartment alone not a 10 minute walk from a city centre (city the same size as Cork) for 440€ per month. Of that 440, 140 or so is a mixture of rates and management fees. To buy the apartment would cost about 100k. New apartments of a similar size in a similar area are over 2.5k per ²m. Further out or older apartments are cheaper.

Now I dunno what your 11 and 16 multipliers are but that gives me a figure of 528 per sq/m (rent is 300 - rest would have to be paid if you owned it too) (again no idea what this is as a calculation). In reality the cost per ²m is about 2k.

MG

bobbysands81 wrote: »

Apples and Oranges mate.

Is the cost of the site in the two countries comparable?

Irrelevant - included in price

bobbysands81 wrote: »

Is the cost of the labour comparable?

Reasonably so. Cetainly not a 50% or more difference. Jobless rate in Ireland 11.9%, in Germany 8.1% so expect Irish rates to fall further as well.

bobbysands81 wrote: »

Is the cost of the raw materials comparable?

Reasonably so. Most raw materials are commodity based, VAT rates differ by 2.5%

bobbysands81 wrote: »

That is one of the lamest arguments I've ever read!!!

Well, I don't know what you normally read. Would you care to put forward an argument youself?

ZYX

MG wrote: »

Perfectly reasonable comparison, two modern western economies with a comparable standard of living. Naturally there will be differences but nothing to justify a 90% difference (at the height of the boom) or a 50% difference at the moment.

In fact, it's more unreasonable to put forward the apples and oranges argument. One measure we can look at ts the Big Mac Index, and as I checked for a link I came accross this from David McWilliams
http://archives.tcm.ie/businesspost/2009/05/31/story42094.asp

"According to economic theory, the prices of Big Macs should be the same all over a monetary union. If they are more expensive in one place, prices must fall for that country to be competitive. Last Friday, in Berlin’s Zoo Station - which was made familiar to Irish ears by U2’s track on Achtung Baby, when the band captured the zeitgeist by recording the album in the city just after German reunification - a Big Mac cost €3.10.

In Dun Laoghaire - a place that has yet to capture the zeitgeist of anything - the same Big Mac cost €3.80.

Ireland’s Big Mac is 70 cent more expensive than Germany’s. Taking this as a percentage of the German Big Mac price implies that Irish prices are some 22 per cent above German prices. Therefore, taking the Big Mac index as our benchmark, if we want to become as competitive as Germany, our prices and wages have to fall by over 20 per cent."

Moreover, the Big Mac index shows the number of minutes worked in Dublin to purchases a big mac is 15mins, compared with 16mins in Germany.

Based on this a variation between German and Irish house prices per sq m may show some variability but 50% or more is not justifiable.

As cross check, do the rental multiplier check....take a 3 bed semi in Kildare renting for 900 per month . 900 x 11 x 16 = 158400 or apprx 1584 per sq/m.

Surely in reality all you can say from this, is based on Big Mac prices, Irish house prices should be 22% more expensive than German figures.

MG

JuliusCaesar wrote: »

Don't see that happening.......

Of course if the huge earners (200K and above) took a 50% pay cut, that would bring our average earnings down.

Not going to happen - anymore than Irish bankers will be seen taken away to Mountjoy in manacles.

PS Germany's population is much more evenly spread out than the population here, with a third of the pop in Dublin and surrounds.

Pop density is are both signifcantly higher in Germany in Ireland, suggesting that prices per sq metre should be higher in Germany.

Pop Density

Germany 231 per sq km
Ireland 54 per sq km

Urban pop

Germany 88%
Ireland 59%

Source: http://www.nationsencyclopedia.com

MG

Imposter wrote: »

There are too many variables that are not taken into account. Such a formula works in Ireland as that is what is peddled as a fair rent.
Since I moved abroad I think Irish rents are way too high which leads to things like people having to house share even if they otherwise wouldn't. It also leads to situatinos in other countries where people have no problems renting long term!

I'll give you a comparison - I live in Austria which should be a lot more comparable to Ireland (in terms of population, big neighbour etc.) than Germany.
I rent a 50²m apartment alone not a 10 minute walk from a city centre (city the same size as Cork) for 440€ per month. Of that 440, 140 or so is a mixture of rates and management fees. To buy the apartment would cost about 100k. New apartments of a similar size in a similar area are over 2.5k per ²m. Further out or older apartments are cheaper.

Now I dunno what your 11 and 16 multipliers are but that gives me a figure of 528 per sq/m (rent is 300 - rest would have to be paid if you owned it too) (again no idea what this is as a calculation). In reality the cost per ²m is about 2k.

Variables tend to be ironed out by the rent return ratio.

Your apartment is about 2000 per sq m in a city centre. A nationwide average should be less as you say, pushing the average price per sq m towards 1600, which is my point.

The multiplier is only a cross check and is a rule of thumb. 11 represents months (one month dropped for expenses and empty months), 16 represents a 6.6% return. Remember too it's a long term average. Your apartment is yielding 3.3% at the moment (allowing one month rent for expenses), you could do better in a deposiut account with money on demand and certainly better tied up over a longer term. Long term the return would have to rise to at least 5%.

MG

ZYX wrote: »

Surely in reality all you can say from this, is based on Big Mac prices, Irish house prices should be 22% more expensive than German figures.

Nope, it leaves more in a Germans pocket to pay a mortgage. In reality, lower net wages (i.e. higher taxes) in Germany probably equalise this.

It certainly does not explain why prices are 50% higher now and were 90% higher two or three years ago.

gurramok

Germans didn't have a house price bubble based on speculation and greed in the last 10years, thats why.

Same for all countries in the EU except Spain and Latvia and maybe throw the UK in there as well.

Come to think of it, its going to be some crash here when you compare the housing situation to abroad, the country has one of the lowest densities in the EU and a crashed economy.

Among the glimmer of gloom, i do expect the 500quid rental to appear quite often in the likes of Dublin city when things settle down, another factor to help us make Ireland less costly.

bobbysands81

MG wrote: »

Well, I don't know what you normally read. Would you care to put forward an argument youself?

Very simple put, and you may need to go back and read the context of your post that I was referring to, (and I mean no disrespect here) the crux of your argument is that if the price of a Big Mac is the same in Ireland as in Germany then the price of houses should be too.

That is just absurd.

MG

bobbysands81 wrote: »

Very simple put, and you may need to go back and read the context of your post that I was referring to, (and I mean no disrespect here) the crux of your argument is that if the price of a Big Mac is the same in Ireland as in Germany then the price of houses should be too.

That is just absurd.

The Big Mac Index (produced by The Economist) is a widely used method of comparing purchasing power in different countries, so yes the argument does stand up, though it's more nuanced than you put it.

Serious question and no disrepect, but have you never heard of the Big Mac Index?

sparklepants

While I'm no economist, I would be of the view that the following part of the McWilliams article is fundamentally wrong:

MG wrote: »

"According to economic theory, the prices of Big Macs should be the same all over a monetary union.

This is counterintuitive to me. Why should the price of a Big Mac be the same all over the Eurozone? My understanding of economic theory is that supply and demand determine the price of a Big Mac. It's possible that the price in Ireland is higher because people are prepared to pay more, or because there aren't enough outlets selling them, or because there aren't as many similarly priced alternatives. In fact, fast food outlets in this country are reporting increased demand inspite of, (or perhaps because of) the economic downturn.

There's also no relationship between the price of houses and the price of Big Macs. In fact I recall 15 years ago that house prices in Germany were higher than they were in Ireland, and yet McDonalds' prices in Germany were still cheaper than they were here. Prices of Big Macs were forced lower in Germany because of the lower running costs of family owned restaurants there, where the cost of real estate was not included in their products. So competition pushed the prices lower.

Sure, house prices still have some falling to do, but the comparison with Big Macs is stupid. It seems to me he's trying to shoehorn a popular price comparison to labour a point about housing.

MG

sparklepants wrote: »

While I'm no economist, I would be of the view that the following part of the McWilliams article is fundamentally wrong:

This is counterintuitive to me. Why should the price of a Big Mac be the same all over the Eurozone? My understanding of economic theory is that supply and demand determine the price of a Big Mac. It's possible that the price in Ireland is higher because people are prepared to pay more, or because there aren't enough outlets selling them, or because there aren't as many similarly priced alternatives. In fact, fast food outlets in this country are reporting increased demand inspite of, (or perhaps because of) the economic downturn.

There's also no relationship between the price of houses and the price of Big Macs. In fact I recall 15 years ago that house prices in Germany were higher than they were in Ireland, and yet McDonalds' prices in Germany were still cheaper than they were here. Prices of Big Macs were forced lower in Germany because of the lower running costs of family owned restaurants there, where the cost of real estate was not included in their products. So competition pushed the prices lower.

Sure, house prices still have some falling to do, but the comparison with Big Macs is stupid. It seems to me he's trying to shoehorn a popular price comparison to labour a point about housing.

The Big Mac is a good rule of thumb given the comparability of the product but variance of inputs by country. If the Big Mac index is good enough for The Economist and other institutions such as UBS, then there is something in it.

Moreover, the extension of the index to the working time is actually an even better comparison. It takes 15 minutes work in Dublin v 16 in Frankfurt to pay for a Big Mac, indicating the similarity of purchasing power in both countries.

Also, on the argument about different demand, a quick google shows me that there is one restaurant per 66 to 68 thousand people (depending on which website I believe) compared to 65-75 in Germany. In other words, demand as measured by no of restaurant per head is not outrageously different.

Although it’s not a perfect measure, it’s still a reasonable measure of the differences between the two countries. The fact remains that a price differential of about 50% exists in housing (previously 90%), but neither the Big Mac index, the Time to earn a Big Mac scale nor the McDonalds demand ( as measured by restaurants per head) can justify this difference. There is no evidence to justify a difference of this scale in house prices and yet there is a refusal to believe in the more logical explanation.

To call it a stupid comparison intended to shoehorn a point frankly illustrates why we got ourselves into this mess – to ignore such comparisons is to ignore warning signs. If only people had asked these questions 3 or 4 years ago!

Kipperhell

You simply can't compare house prices as suggested as it ignore fundamental differences between the countries histories,current situation and starting points.

Namely large companies rebuilt many of the German cities accommodation which was in a appartment style with strict rules in place. Ireland built houses and then sold them at a cheap price to the occupiers.

As many people often complain about the small time landlord here is is quite apparent the best situation in Ireland is to own rather than rent and has been so historically. While in Germany it has been fine to rent and there is rent control along with all the other rules making renting a valid option so demand to purchase a house does not exist.

Fundamentally the markets for property are different and not a valid comparable single market. It is a bit like wondering why boat ownership in land locked countries is different to that of island nations. They are different places

ZYX

MG wrote: »

Nope, it leaves more in a Germans pocket to pay a mortgage. In reality, lower net wages (i.e. higher taxes) in Germany probably equalise this.

It certainly does not explain why prices are 50% higher now and were 90% higher two or three years ago.

MG wrote: »

To call it a stupid comparison intended to shoehorn a point frankly illustrates why we got ourselves into this mess – to ignore such comparisons is to ignore warning signs. If only people had asked these questions 3 or 4 years ago!

You are saying German Big Mac is more expensive than Irish big Mac. As a representative of prices that implies that Irish houses should be more expensive than German.
You also say that it takes less time to earn Irish Big Mac than German Big Mac. That implies more in an Irish pocket to pay a mortgage. Both point to Irish house prices being more expensive than German houses. How are you getting anything different from this?

ZYX

MG wrote: »

The Big Mac is a good rule of thumb given the comparability of the product but variance of inputs by country. If the Big Mac index is good enough for The Economist and other institutions such as UBS, then there is something in it.

By by the way you do know that the big mac index is not meant to be too serious. It is supposed to be a funny way of looking at ecconomics. Neither UBS or the Economist take it seriously

gurramok

I'm still trying to figure out why this one is asking €6666 per sq m.
http://www.daft.ie/1458687

"In need of modernisation", Maybe its the 'devil' in the detail

Why is the price of €6666 per sqm and the 22 sisters of this house at or above this price in Ringsend on Daft now, justifiable?

crocro

gurramok wrote: »

I'm still trying to figure out why this one is asking €6666 per sq m.
http://www.daft.ie/1458687

"In need of modernisation", Maybe its the 'devil' in the detail

Why is the price of €6666 per sqm and the 22 sisters of this house at or above this price in Ringsend on Daft now, justifiable?

Floor space in the city centre is more valuable than the same square footage in the suburbs.

A friend of mine bought one of these houses in 1993 for IR£50K (€62.5K).

At peak they sold for €550K. They are small but extendable - attic conversion plus decent kitchen is possible.

Compare with a city centre apartment for value.

I expect them to bottom out at 180-200K.

gurramok

On the topic in question, is there any city in Europe with a working class area within spitting distance of the city centre asking for €6666 per sqm?

crocro

gurramok wrote: »

On the topic in question, is there any city in Europe with a working class area within spitting distance of the city centre asking for €6666 per sqm?

I'm sure you can pay that in London - but not a comparable city. I would guess that about 350k is a normal price for a european city center 2 bed apt of about 80sq m.

Here's a tiny house in munich city centre for 4333.33 / sq m
http://www.immowelt.de/Immobilien/ImmoDetail.aspx?ID=15080606

Working class area? It certainly looks it (educating rita etc) but it's about half-and-half working class/ professional at this stage. It's maybe 200m walk from Google and other high end employers. There's some extra value to living in a house compared to an apartment. It's Dublin 4 and just over the shelbourne road boundary between ringsend/ballsbridge - real ringsend is the east side of the Dodder as they will tell you.

That said, I guess it will still fall another 40%.

MG

ZYX wrote: »

You are saying German Big Mac is more expensive than Irish big Mac. As a representative of prices that implies that Irish houses should be more expensive than German.
You also say that it takes less time to earn Irish Big Mac than German Big Mac. That implies more in an Irish pocket to pay a mortgage. Both point to Irish house prices being more expensive than German houses. How are you getting anything different from this?

I think if you look back on the thread, I introduced the Big Mac argument to back up my contention that Germany and Ireland are comparable, in a way that India and Ireland are not. There is a difference in the price of the Big Mac between Germany and Ireland (which should close according to David McWilliams) but not enough to conclude that the housing markets are fundamentally different. I would still contend that it is impossible to justify a 50% difference in house prices but simply saying "apples and oranges"

ZYX wrote: »

By by the way you do know that the big mac index is not meant to be too serious. It is supposed to be a funny way of looking at ecconomics. Neither UBS or the Economist take it seriously

Yup, which is why I felt I could draw the conclusion that Ireland and Germany are comparable but not enough to conclude that it implies a 22% difference.

MG

gurramok wrote: »

On the topic in question, is there any city in Europe with a working class area within spitting distance of the city centre asking for €6666 per sqm?

If I remember correctly, the highest sq footage that I noted in my German sample was in the 4000-5000 per Sq M range.

crocro

gurramok wrote: »

I'm still trying to figure out why this one is asking €6666 per sq m.
http://www.daft.ie/1458687

"In need of modernisation", Maybe its the 'devil' in the detail

Why is the price of €6666 per sqm and the 22 sisters of this house at or above this price in Ringsend on Daft now, justifiable?

now reduced from 360 to 275k or 5k per sq m

gurramok

So, on it goes down to its natural level, we'll se how far it will go to that natural level

Kipperhell

MG wrote: »

I think if you look back on the thread, I introduced the Big Mac argument to back up my contention that Germany and Ireland are comparable, in a way that India and Ireland are not. There is a difference in the price of the Big Mac between Germany and Ireland (which should close according to David McWilliams) but not enough to conclude that the housing markets are fundamentally different. I would still contend that it is impossible to justify a 50% difference in house prices but simply saying "apples and oranges"

Well this is where selective ignorance can come in to play. A pint of beer in France in a bar is more expensive than here. There is no apparent reason for it. Cars are more expensive here again there is no apparent reason. If you don't actually look at the detail you can claim there is no reason. So to argue that house prices should be the same based on burger prices without looking at the detail is just as stupid as blurting out "apples and oranges". The difference being when people say " apples and oranges" they assume a certain level of knowledge of the property market.

MG wrote: »

Yup, which is why I felt I could draw the conclusion that Ireland and Germany are comparable but not enough to conclude that it implies a 22% difference.

So you have some random index you personally use on top of some fun economic joke that you are using to point out how the Irish property market should be based. Using such arguments and beliefs you really can't come to any logical conclusion but I am sure you can get a feeling of always being right.
Not saying you are wrong out right just pointing out the argument is completely ridiculous