Daft has been getting lots of exposure in the Irish Times recently, as the batch of year-end reports and prognoses for 2009 flood in. In particular, the Irish Times has begun whetting the appetite for the 2008 Year in Review Daft Rental Report. Their recent article, ‘A renter’s market‘, reviews current trends in the rental market, citing the November Daft Report, which found a fall of almost 8% in rents in 2008 up to that point. It also pointed out the single most noteworthy feature of Ireland’s rental market at the moment, the overhang in rental stock around the country, which suggests that the smart money is on the next report to show a continuing fall in rents in pretty much every part of the country.
Below is a pithy analysis in the article from a man with a growing national reputation, Stephen Kinsella:
“What’s happened is that people bought [properties] to flip,” says Dr Stephen Kinsella, of the Kemmy Business School in UL. “They weren’t selling so they put them on the rental market. So what’s been happening over the last number of months is that the supply of available high-quality, brand new housing, especially apartment housing, has gone through the roof.” On the other side of the rental equation, demand has flagged due to the exodus of migrant workers from Ireland. The ESRI expects that net outward migration will reach 50,000 in the year to April 2009, which would free up even more rental properties. “You don’t need a PhD in economics to know when the supply of something goes up, the price of it is going to go down,” says Dr Kinsella.
Earlier IT coverage of the Daft Report focussed on the ongoing debate about the true level of house price falls. On Wednesday January 14, it reported the main findings from the Year in Review report for the sales market, alongside findings from the IAVI report out the same day. In an article entitled ‘Prices of houses in Dublin fall by 16.5%‘, the paper reported:
The latest Daft.ie house report, also published yesterday, shows that asking prices for houses fell almost 15 per cent over 2008.The decline in prices, according to the property website, accelerated in the latter months of 2008 with asking prices falling 5.8 per cent in the last quarter alone. According to Daft.ie, the national average asking price fell €58,000 in 12 months to €295,000, the same level as in January 2006.
Somewhat confusingly, though, the very next day, it published an article that was not so keen on the Daft Report. (One could of course be all conspiratorial about these things, bearing in mind that the Irish Times owns daft’s rival myhome.ie, Ireland’s second largest property portal, with approximately one third of the visitors, traffic and listings of daft.ie!) Michael Grehan, MD of Sherry Fitzgerald, sought to set the record straight on the true state of the property market, in an article entitled ‘Reports do not reveal true price drop‘:
Michael Grehan, managing director of Sherry FitzGerald, says that a report this week by property website Daft.ie, which showed a 15 per cent fall in house prices last year, doesn’t tell the full story, since the research is based on asking prices rather than those actually achieved. Grehan argues that while Sherry FitzGerald’s own property indices shows an average price correction of 30 per cent, since the peak, he knows of properties that appear to have taken cuts of 40, 50 and even 60 per cent, in at least one case. The size of the drop has been confirmed by other agents who have seen prices fall through the floor as buyers bargain aggressively. “The lack of publicly available information on actual sales prices puts buyers at a disadvantage as there is often a big difference between an initial asking price and the eventual selling price,” says Grehan.
Of course, he’s dead right. The Daft Report is based on asking prices, which is why, for example, the index is called the Asking Price Index. Also, it’s nice to see what those on thepropertypin.com would call a VI (vested interest) arguing strenuously that house price falls have been up to three times as large as those reported in the statistics. What makes it all a little bit more confusing, however, is that Sherry Fitzgerald conducted their own analysis of the Irish property market in 2008 and published their findings a week earlier. And what did they conclude? According to a January 7 report in the Irish Times entitled ‘More price cuts as season starts‘:
The average price of a second-hand property in Ireland fell by 7.1 per cent during the final quarter of 2008, according to a report by the agency [Sherry Fitzgerald] earlier this week. “This brings the level of price deflation for 2008 to 18.1 per cent – the highest level of price deflation ever recorded in the Irish market,” says the company’s chief economist, Marian Finnegan.
Confused? I know I am!I think it’s probably fair to say, though, that most people would be surprised if the 3% gap between the 2008 fall in Daft’s asking prices and the 2008 fall in SF’s index of prices truly reflected how much buyers are undercutting listed prices – which I think was Mr. Grehan’s point.
The moral of the story? Probably nothing more insightful than: know your stats, what they’re telling you and what they’re not, and always keep a healthy sceptical outlook on everything you read.