PTSB ESRI Analysis of the Dublin Area

mathie

Right guys a little help here if you can.

My back of a fag packet analysis for Dublin house price averages is below ....

In Dublin in 1996 the average was 75K
In Dublin in 2006 the average was 375K (nuts eh?)
So if we say 1996 to 2006 was a bubble and ignore it then what if there was no bubble?
If we take 4% growth from 1996 to 2010 we get 175K as the average for Dublin.
The ptsb esri had it at 242K for the average up until Q2 2010.

Look at the quarterly drops for Dublin below (PTSB ESRI)
Say an average 5% for the next few quarters that’ll put the averages at ...
Q2 2010 242K
Q3 2010 229.9K
Q4 2010 217.4K
Q1 2011 206.5K
Q2 2011 196.2K
Q3 2011 186.8K

And the average (with 4% growth from 1996 would be 184K)

This points to a ‘bottom’ of mid to late 2011 (minus the potential overshoot)

Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010
-4.2% -9.0% -3.5% -5.7% -7.5% -10.3% -3.5%

Is 4% growth reasonable to expect in a normal functioning market?
Any other thoughts?

ntlbell

What about the empties?

what about all the unemployment?

What about lower wages?

What about increased taxes?

Treehouse72

Mathie, my maths are atrocious, but are you sure that €75,000 @ 4% inflation over 14 years is €175,000?

Highly Salami

Treehouse72 wrote: »

Mathie, my maths are atrocious, but are you sure that €75,000 @ 4% inflation over 14 years is €175,000?

I got €130,000.

robd

Highly Salami wrote: »

I got €130,000.

Yep. me to (approximately).

Formula is 75,000 x (1.04^14) = 129,875.73 [NOTE: ^ = power of]


However the generally taken figure is GDP growth (or GNP really in Irelands's case) each year rather than inflation.
GDP growth is better relation to wage growth and house price growth than inflation.
This is the economic think, not mine.

Treehouse72

Yeah, c. €130,000 is what I got too based on 4% pa.

It strikes me that 4% pa is not unreasonable as it would roughly approximate to non-boom inflation level growth. I don't see much reason to believe that using GDP growth instead as a proxy for inflation would make a huge amount of difference since we can hardly have expected GDP growth to be higher than 4% in "normal" times.

Anyway, if we're looking to get to €130,000 to match 1996 in real terms that pushes the bottom date projection in OP back several quarters to perhaps the start of 2013.

Coincidentally (or perhaps not), 2013 is 6 or 7 years after the bubble burst, which is about how long it takes most property bubbles to unwind peak to trough in historical terms. Also by coincidence (or perhaps not) that €130,000 is c. 3x/4x an average Dublin salary, the historical lending multiple. Also by coincidence (or perhaps not) when you look at a graph of the house price crash and trace where the downward line will hit long term trend, it ends up at about €130,000 sometime in early 2013.

Anyone think that those three coincidences are perhaps not so coincidental?

subway

no market comparison breakdown done as usual.
not by OP (he has nothing to go on like the rest of us) but by the usual suspects.

average house price is 242k?
whats the average house? do you add all the houses in ireland together and divide by the number of houses? as we all know thats impossible.

we must agree on a measure of houses (sq.ft., bedrooms, total rooms, etc, etc)
what about availability of jobs within a reasonable drive / walk / public transport route measured by salary etc.

all we know from this report is that if you measure houses by asking price and divide by total number you get 242k. (or whatever sample they use)

but they are actually telling us nothing.
what was the average size of house measured and so on etc.

there is no point saying that in 96 the average house was 75k if it was a 3 bed semi and its 242k in 2010 if its a 2 bed apartment.
there is no point tellng me the average house price has dropped 30%,40%,50%,60% if that house is not near any jobs.

and on top of all that, asking prices are just pie in the sky, real property price database please.

seamus

Treehouse72 wrote: »

It strikes me that 4% pa is not unreasonable as it would roughly approximate to non-boom inflation level growth. I don't see much reason to believe that using GDP growth instead as a proxy for inflation would make a huge amount of difference since we can hardly have expected GDP growth to be higher than 4% in "normal" times.

We can't forget that we came from a much lower base though. We did experience more than 4% growth in real terms (ignoring the property bubble) to bring us up to and beyond EU levels. If we had continued to grow at base EU levels from 1996, we would still be down there as a "developing" EU economy with a much lower cost base, like Poland or Romania for example. The boom wasn't entirely driven by housing. Most would agree that we experienced a significant boom up to the early 2000's, which began to tail off but was then propped up by an explosion in the housing industry from 2001/2002 on.
I'll have a look at the figures later on.

robd

4% is considered normal potential growth rate for France/Germany etc.

Ireland's was considered 7% (note it was way above this, that was the non bubble considered potential). 4% is probably likely the consideration over the next decade as we attempt fix this mess up and also converge on European norm.

If you put 7% in from 1996-2008 (12 years) and leave it at 0 for the last 2. you
get 75,000 x (1.07^12) = ~170k.

That's more a long term average. 130k is way to cheap for an average in the country, ignoring employment and over building as we're talking a long term average that could/should have been had we not had the bubble. 170-175k seems about right.

Interest rates are lower than they used to be due to stability and large size of EU so the 3-4 times income is a little low. So 5 x 35k average income = 175k.

Obviously there's the much talked about potential to overshoot this. We're just talking what if the bubble never happened, where would we be.

The GNP/GDP growth is what all economists use.

Treehouse72

subway wrote: »

no market comparison breakdown done as usual.
not by OP (he has nothing to go on like the rest of us) but by the usual suspects.

average house price is 242k?
whats the average house? do you add all the houses in ireland together and divide by the number of houses? as we all know thats impossible.

we must agree on a measure of houses (sq.ft., bedrooms, total rooms, etc, etc)
what about availability of jobs within a reasonable drive / walk / public transport route measured by salary etc.

all we know from this report is that if you measure houses by asking price and divide by total number you get 242k. (or whatever sample they use)

but they are actually telling us nothing.
what was the average size of house measured and so on etc.

there is no point saying that in 96 the average house was 75k if it was a 3 bed semi and its 242k in 2010 if its a 2 bed apartment.
there is no point tellng me the average house price has dropped 30%,40%,50%,60% if that house is not near any jobs.

and on top of all that, asking prices are just pie in the sky, real property price database please.

Hang on, do you mean to tell me that my amateur analysis, simplistic maths, scatter-gun application of common sense and compendium of back-of-an-envelope guesstimations isn't 100% accurate?

Oh man, this comes as a terrible let-down to me. All this time I thought my internet musings had the deadly accuracy of a particularly finely-tuned slide-rule!

Subway, for crying out loud of course the analysis is crude, but that is not to say it is without merit or wildly inaccurate. Indeed, I am only using the same methods of analysis - primarily common sense - that I used during the bubble to work out that we were heading for an almighty crash. That analysis turned out to be entirely correct, if anything underestimating the falls to come. At that time I was told the same thing - my analysis was amateurish, the figures were unclear, I wasn't taking account of x, y and z factors. But you know what, it was all guff. Turned out that common sense and simple sums were indeed all you needed to see what was going on. So why shouldn't the same thing do us now?

+1 on the price database by the way. But -1 on the suggestion that without it we are entirely clueless and can't come to reasonable conclusions about where we're going.

seamus

robd wrote: »

Obviously there's the much talked about potential to overshoot this. We're just talking what if the bubble never happened, where would we be.

I don't think overshooting the bottom is a potential, more a certainty. It will be especially so while the recession continues and people's ability to get credit suffers. Once we see a stabilisation of the economy and people's wages, it should be possible to predict the bottom with some degree of accuracy.

subway

Treehouse72 wrote: »

Hang on, do you mean to tell me that my amateur analysis, simplistic maths, scatter-gun application of common sense and compendium of back-of-an-envelope guesstimations isn't 100% accurate?

Oh man, this comes as a terrible let-down to me. All this time I thought my internet musings had the deadly accuracy of a particularly finely-tuned slide-rule!

Subway, for crying out loud of course the analysis is crude, but that is not to say it is without merit or wildly inaccurate. Indeed, I am only using the same methods of analysis - primarily common sense - that I used during the bubble to work out that we were heading for an almighty crash. That analysis turned out to be entirely correct, if anything underestimating the falls to come. At that time I was told the same thing - my analysis was amateurish, the figures were unclear, I wasn't taking account of x, y and z factors. But you know what, it was all guff. Turned out that common sense and simple sums were indeed all you needed to see what was going on. So why shouldn't the same thing do us now?

+1 on the price database by the way. But -1 on the suggestion that without it we are entirely clueless and can't come to reasonable conclusions about where we're going.

take a deep breath!
OP (original poster) referenced is mathie and i even took the time to specify that i wasnt criticising his analysis

but top marks for righteous indignation. if you have a point to make let me know.

Treehouse72

Fair enough Subway, I apologise for my tone.

My point was simply that I don't agree with you that the guesstimations being made in these threads are "telling us nothing". That cannot be correct and I don't think the evidence backs it up.

subway

no bother
in fact i agree wholeheartedly with your point, guesstimations being made in these threads do have huge value,in that they continuopusly dispel the myth that the lines being fed to us on the media are the truth and in our best interest.

what gets me annoyed is that the value is limited to a huge subset of the popualtion (boards) and even then to a subset of that (acc & prop readers) and maybe even more of a subset again (people who are willing to read with an open mind).
you referenced the "housing bubble bursting" thread earlier, i often think about how long that went on before people began to listen to the information being produced. how many people fought tooth and nail for the myth to be real.

my biggest concern is that we will constantly be stuck in denial as long as reports based on fantasy are put forward as fact in the public domain. even ronan lyons of daft is looking forward to a factual database (http://www.thepropertypin.com/viewtopic.php?p=434050#p434050) as a better gauge than their own analysis.
the ptsb/esri index is based on such hugely limited data (the rate of transactions is still miniscule) that it should have been long since abandoned but stll the media loves it

robd

seamus wrote: »

I don't think overshooting the bottom is a potential, more a certainty. It will be especially so while the recession continues and people's ability to get credit suffers. Once we see a stabilisation of the economy and people's wages, it should be possible to predict the bottom with some degree of accuracy.

True. I guess I was paraphrasing.