How much are rents falling around the country?

The latest Rental Report is out today. It shows that rents across the country fell by more than 5% in the first three months of the year. The national average rent now stands at €840 per month, compared to just over €1,000 per month a year ago. Nationwide, rents have now fallen for 14 consecutive months. The fall since the peak early last year has been faster than the rise before that, and with rents 17.5% lower than the peak in early 2008, rents are now back mid-2005 levels.

The largest falls in rents have been in the cities. In Dublin and Limerick, rents fell by up to 6.5% in the first three months of the year. In Waterford and Cork cities, rents fell by 5.3% and 5.1% respectively. In Galway, the fall in rents was smaller, at 4.3%. Rents in Dublin’s commuter counties and in West Leinster (i.e. Laois, Longford, Offaly and Westmeath) – presumably an indication of their role as Dublin’s outer and further-outer commuter belts – have fallen by about 6%, more than the national average. At the other end, South-East Leinster (Carlow, Kilkeny and Wexford) and the counties of Connacht and Ulster have seen rents fall by less, typically by about 3.5%. Rents in Leitrim and Roscommon fell by less than 1.5%.

The county-by-county changes are outlined in the map below. As you can see, it’s the extended Dublin area that’s being hit most. For the full details on average rents by county and how much they’ve fallen in the last three months and in the last 12 months, check out the Manyeyes visualization here.

Change in rents by county, 2009 Q1

Change in rents by county, 2009 Q1

The reason for all this is clear – the rental market is feeling the brunt of too much supply and not enough demand. On the supply side, the number of properties available for rent is now over 23,000 – an all time high, certainly compared with the 5000-6000 range we saw on the site up to 2007. This means that landlords are having to fight for tenants, pushing down rents – and rent-a-room income – pretty much everywhere. Add to this falling demand, as Ireland’s most footloose workers head off to pastures new, and it’s pretty clear that the pressure on rents throughout 2009 and maybe into 2010 will be downward pressure.

This report’s commentary is provided by Brian Devine, Chief Economist at NCB Stockbrokers. He highlights the challenges and perils of forecasting facing economists today:

In relation to the property market there have been plenty of forecasts regarding how far residential prices (ranging from -35% to -60%) and to a lesser extent residential rents (ranging from -20% to -35%) are going to fall from peak to trough. Some studies/views on how far prices will fall are based on historical comparisons with previous OECD housing busts. Others invoke the idea of a “fair value” for housing based on, for example, one or more of the following: income-price ratios, mortgage repayment burden, rent-price ratios, rental yield, credit availability, population growth, interest rates and growth in per capita disposable income.

The problem with trying to forecast prices/rents based on the concept of fair value is that prices overshoot and undershoot fair value. The magnitude of the overshoot/undershoot is ultimately determined by psychology. While the psychology of never ending price rises fuelled the market on the way up, economic/job uncertainty and the expectations of further price falls will be the important psychological factors on the way down.

Next week’s property market post will have a look at affordability, i.e. the maths of buying versus renting, based on these figures, and how yields have been affected by the latest falls in rents.

Westmeath says ‘Watch out below’! An updated heat-map of Ireland’s property market

A little behind schedule, given that the report is out a couple of weeks at this stage, but the latest Manyeyes visualization of Ireland’s property market is up here. The overview snap is below.

Heat map of price changes in Ireland's property markets

Heat map of price changes in Ireland's property markets

As you can see, all counties have notched up two consecutive quarters of price falls by this stage (Limerick was last to fall). Some counties are now on six quarters. It seems that those that fell first have fallen hardest – in the Midlands (defined loosely enough), Laois and Longford were among the first counties to register falls in asking prices. They have now been joined by neighbouring counties, which are among the worst affected so far by falling prices. Take Donegal, for example, which was among the last to give up rising prices, where they are now 17% lower than a year ago. In Westmeath, the figure is even higher (18.1%), which marks a huge slide of more than 10% in the year-on-year change from the previous quarter. Longford and Louth are also in the same range close to 17%.

Now, as for Tipperary and Waterford (and Limerick and Mayo, the other two counties where falls are still single digits)… Are sellers there living in a mild form of cloud cuckoo land? Even looking at fall-from-peak figures, rather than year-on-year, they’re still in single digit territory. Or perhaps they think that they’re more sheltered, because the overhang of property is not as severe as it is in the Midlands/North-West? Answers on a postcard…

(PS. Do people think that this heatmap should change from year-on-year changes to one masuring the fall from the peak instead? That might give a better idea of total adjustment. Biggest adjustment so far is still Westmeath, down 20.0% exactly.)

Brrr… Sure ’tis cold in Sligo: A heat-map of Ireland’s property prices since early 2007

As those who’ve checked out/had to put up with my many word clouds on various different topics from Wicklow genealogy to Barack Obama will testify, I’m always looking for new ways to present data and information. For those with similar interests, a useful tool in that regard is Manyeyes, a free data visualization service offered by IBM. First thing you might do when you click through is have a wander around some of its featured visualizations, such as the OECD economic outlook or the World Cup Finals.

You needn’t stop there, though, as once you’ve registered, you can upload datasets yourself and visualize them. What’s particularly cool, in my opinion, is the ability to do maps with subnational data points, e.g. for the USA, China and, somewhat surprisingly until you remember IBM’s presence in the country, Ireland.

So I plugged in some county-level statistics from the database, in particular the year-on-year % change in asking prices by county from the first quarter of 2007 to the third quarter of 2008. The results are available for all to see on Manyeyes – I haven’t been able to put a live visualization up here, but you can get a sneak preview below and indeed the whole shebang just by clicking on the picture.
E9a845ba-c221-11dd-9c2e-000255111976 Blog_this_captionWhat, even clicking on the link is too much hassle? OK, here’s the lazyman’s version:

Heat-map of Ireland's property prices

Heat-map of asking prices for Irish property, 2007/2008

The easiest way to get the overview of the story – but with the minimum detail and surprise factor – is to go straight from 2007-q1 to 2008-q3. As you can see the map goes from totally brown to totally blue! But that naturally is hiding a lot of detail… So here are some other highlights on regional trends in Ireland’s property market:

  • Sligo is a constant underperformer – having enjoyed some of the smallest increases in the first half of 2007, it’s now suffering from some of the largest falls in 2008
  • Aside from Sligo, West Leinster was the first region in the country to suffer from falling house prices, in year on year terms, with Longford and Laois falling in year-on-year terms by (and we can pretty much throw in Westmeath there too, where prices were no higher than a year previously, in the same quarter)
  • In late 2007, asking prices in south-east Leinster (e.g. Carlow, Kilkenny) and neighbouring Munster counties (Tipperary, Waterford) were still rising in year-on-year terms.
  • Limerick was the last bastion of rising house prices. It’s the only county not to have registered two consecutive quarters of year-on-year falls in house prices… yet!
  • Have a look at 2007-q4… poor old Donegal just doesn’t get it! Even in early 2008, it was still at it. In Q3 2008, though, with prices down over 11% compared to a year earlier, it’s landing with a bang.

There are just some initial observations on the figures – overall, Manyeyes is a pretty useful tool, I’d have to say. I’d be interested in hearing anyone else’s observations on regional differences in price trends. What have I missed? Or indeed, what should I be heat-mapping?