The latest Permanent TSB/ESRI House Price Index was published today.
At a glance, the latest index would appear to paint a relatively positive picture of the market and radio commentators on Newstalk 106 and RTE Radio 1 pointed to the index being evidence of the longed-for ’soft landing’ in the housing market. Unfortunately the index does not provide the full picture for several key reasons:
- The index fails to take account of inducements being offered by certain developers who are trying to sell new houses. Where offered, inducements presently can range in value from between 2% to 7.5% of the house value.
- Only the sale prices of houses are being tracked. Figures are based on completed transactions only. Therefore the figures are skewed in that they don’t take into account drops in asking prices that most of us have anecdotal evidence of - particularly in the second-hand market. Also, the figures are undermined by the fact that the number of transactions that make up the survey here in 2007 is likely to be much lower than the comparative period in 2006 or 2005.
- The figures are further affected by the lead in time from the ’sale agreed’ stage of a house purchase to the ‘completion stage’. For a second-hand house this could average out at about 10 weeks while for a new house this would be shorter if the house is already built or much longer if the house is not yet completed. Therefore, there is always a lag before the index catches up fully with what’s actually happening in the market.
- Finally, market sentiment is hard to pick up from these figures. One traditional method of testing sentiment is to look at the size of the property sections of the Irish Times, Irish Independent and The Examiner. While there are still plenty of properties being offered for sale, the days of 40-50 page sections seem to be gone for the forseeable future.
So what are we saying? More data please!
- For a start, it would be useful for the ESRI to also publish the number of transactions that make up their survey.
- Also, some reliable measure of the movement in actual asking prices would also be beneficial but it’s hard to see how this could be accurately compiled.
Finally, it has to be said that the Buyer’s Market is definitely here - and here to stay for more than just a short holiday. Gone, for the moment, is the requirement for rushed house purchases which has to be a good thing.
