How many mortgage-holders are faced with unemployment?

A couple of weeks ago, I discussed the likely extent of the problem of negative equity and homes worth less than when they were bought. This had led to a rich vein of suggested blog posts as extensions, including last week’s look at which counties have suffered most from “unexpected” unemployment since the start of the recession.

That post was a first step towards estimating how many households are faced with both unemployment and negative equity. Today’s post is an intermediate step: how many mortgage-holders are unemployed? How does this vary across counties? And what would it look like if the Live Register were to hit 500,000, as some have suggested it might?

There are about 1.7 million households in the country – almost 600,000 were mortgage-holders in the Census of 2006 and they have been joined by another 90,000 or so first-time buyers since then. (Landlords and buy-to-let investors are of course another issue, but I’ll leave them out for the moment.) At the same time, since the Census, the number on the Live Register has increased from 155,000 to 385,000, meaning there are about 230,000 “unexpected unemployed” around the country, many of whom would have bought property at some point over the last decade or two assuming a stable employment situation.

Working out how many of those two groups intersect is not a precise science. Given the broad nature of the economic downturn in Ireland, I have assumed that unemployment has been indiscriminate across working households, i.e. of the 230,000 new unemployed, 55% are in homes with a mortgage, the same ratio in the broader labour force. The map below gives the approximate percentage of households with a mortgage where one person has become unemployed since the recession started. The national average is about 7% of households with a mortgage (or one in fifteen) are currently faced with unemployment.

Unemployment among mortgage-holders in Ireland by county

Unemployment among mortgage-holders in Ireland by county

It might be useful to walk through one county to explain in more detail. In Louth, where there are 44,000 households, about 14,000 of them are more than likely households with retired (and mortgage-free) inhabitants. Of the remaining 30,000 households, just under 20,000 are owner-occupiers with mortgages. At the same time, almost 9,000 people have been added to the number of unemployed people in Louth in the last two years. Assuming that the spread of unemployment was not related to home ownership status, that would mean that 60% of the new unemployed – or just over 5,000 people – are mortgage-holders. If those figures are at least in the right ballpark, that means that one in eight households with a mortgage in Louth is dealing with unemployment.

If you go to the original Manyeyes visualization, you can also look at the 2010 scenario of 500,000 on the Live Register, which assumes that the future increase in unemployment is distributed the same way the increase in the last 24 months has been. Because of that assumption, the regional dynamics don’t change – Leinster is still clearly worst affected – but the national headline naturally worsens. In that scenario, 10% of mortgage-holders would be faced with the problem of unemployment.

The final piece of the puzzle – next week’s post – is estimating how many of those who are unexpectedly unemployed and who have a mortgage are faced with the loan on their property being greater than that property’s current value.

Are more open countries being hit harder in the recession?

This morning, the ESRI has published its latest Quarterly Economic Commentary, which led to George Lee being pushed on Morning Ireland into saying Ireland was the “worst in the developed world” when it came to economic contraction. Fortunately, within the last week, the IMF has produced its latest World Economic Outlook, “Crisis & Recovery“. This contains the latest predictions by the Washington-based organisation on economic output for all countries for this year out to 2014… although to be fair, the focus from most people is understandably on 2009, rather than 2014.

The map below – fully available on Manyeyes – shows estimated GDP growth (or not) by country in 2009, the worst year for the world economy since World War II. Speaking of war, while 27 countries are predicted to have strong growth in 2009, many of them are post-conflict countries, presumably with a lot of spare capacity and/or natural resources, such as Afghanistan, Congo, Ethiopia, Iraq, Laos, Myanmar and Timor Leste. A couple more are simple cases of natural resource-driven economies, such as Qatar and potentially Turkmenistan and Uzbekistan.

GDP growth, 2009 (Source: IMF)

GDP growth, 2009 (Source: IMF)

Large swathes of the world, almost 70 countries in total, are blue, meaning GDP contraction in 2009. These are concentrated particularly in developed and transition markets, as well as the larger economies of Latin America. A dozen economies face GDP contractions of greater than 5% this year. While Ireland is on the list, it is not a sore thumb, particularly when one looks at countries such as Iceland, Estonia and Singapore, also small open economies. In fact, the whole list of those worst affected this year reads, unfortunately, like a Who’s Who of Washington Consensus poster boys from earlier in the decade:

  • Botswana – one of Africa’s few success stories over the past two decades, growing at more than 8% a year until recently
  • Estonia, Latvia and Lithuania – three small open economies that had bought heavily into the dream of European integration
  • Iceland – no explanation needed, unfortunately
  • Ireland – end of the exporting good days… or end of the domestic boom?
  • Japan – one of two large economies on the list, facing collapsing export values
  • Russia – the other giant on the list, hit more heavily than other resource economies
  • Seychelles – a relatively successful and open economy, coming down from a heady 2006/2007 boom
  • Singapore and Taiwan –  two of Asia’s most successful exporters in the good days
  • Ukraine – again, a very strong economic performance since 2000, with natural resources playing their part

Largely speaking, these, the worst hit economies of the 2009 recession, are open economies and in many cases small ones too. I thought it would be worth investigating across the entire pool of almost 200 economies whether there was a correlation between 2009 performance and (1) openness and (2) 2001-2007 ‘trend’ growth. The full visualization is here (you can play with the axes, highlight your own country – Ireland highlighted below, flip the chart, etc..), but for the overall story, see below.

Openness & Growth, 2001-2009

Openness & Growth, 2001-2009

A quick guide to how to read it:

  • The further down a country is, the greater its GDP contraction this year. (Qatar’s expected phenomenal 20% growth this year – oh, to have gas reserves! – actually stretches out the axes a little more than ideal.)
  • The further to the right a country is, the more open it is, as measured by World Bank trade-GDP ratios. (The three trade-a-holics, Singapore, Hong Kong and Luxembourg, again stretch this out a little – closely followed, incidentally, by the Seychelles.)
  • And if two dimensions weren’t enough, the size of the bubble represents average growth between 2001 and 2007.

While not a perfect correlation, it’s pretty clear that more open economies are facing into tougher economic times. Two quick and related concluding remarks. Firstly, a second glance back at the map shows that Africa and Asia are the best performing continental economies this year. I doubt it’s a coincidence that the vast bulk of population growth over the coming two decades will be from these two regions. The slow but steady formalization of markets continues under the radar in both.

The second point builds on this. The story we were all sold in 2007 was one of decoupling. “No matter if the US and Europe go into recession,” went the story, “because the BRICs will rescue us.” Brazil and Russia in particular did not pass that test, but China and India have fared better. Both economies do look like coming in about 5 percentage points below 2001-2007 trend growth this year, which may certainly feel recession-esque, particular with global euphoria and expansion a thing of the past. Nonetheless, they are still among the fastest growing economies in the world, forecast at above 5% in 2009. China and India are also by the largest of the BRIC countries, with almost 30% of the world’s population, suggesting that they have a critical mass of domestic demand that Brazil and Russia lack.

Lopping the top half off & Ireland’s property market in a global perspective

On Monday the latest report came out, showing that asking prices had fallen just over 4% in the first three months of the year. Yesterday, I changed focus on the blog a little, as it was Budget day, and tried instead  to put some numbers on what a potential property tax could raise.

Today, I hope to give a little more detail on the findings from the report itself, in particular regional trends, and then give an international perspective also – or at least start to give one, which I think is always instructive. Below is a graph showing the quarter-on-quarter change in asking prices for the last two quarters, i.e. Q4 2008 and Q1 2009, in each county.  The most obvious finding – probably not a surprise to anyone – is that asking prices fell in almost all counties in both quarters. A second clear finding is that there does not appear to have been one or two counties more affected in the last six months than elsewhere (although one could make the argument that Munster has got off relatively unscathed since September).

Quarter-on-quarter changes in house prices, 2008q4-2008q1

Quarter-on-quarter changes in house prices, 2008q4-2008q1

What also jumps out is that the two quarters saw very different patterns. In the final three months of 2008, a few counties – such as Galway, Westmeath and to a lesser extent Donegal and Leitrim – saw the largest downward adjustments in asking prices. Two counties, Mayo and Tipperary actually saw no fall in their asking prices. This quarter, Mayo and Tipperary actually had slightly larger falls than average – perhaps a sign that sellers there had been holding for the start of the year before acceding to the realities of the market. On the flip side, sellers in Galway and Westmeath believed in Q1 that their large adjustments in late 2008 did not need to be followed up with more adjustments straight away.

Sligo has been the worst hit county in terms of falling house prices, with a fall in the region of 10%in three months alone. (Dublin city centre and Waterford city actually saw bigger falls but they are lessened by other parts of their counties.) Aside from that, it seems that Dublin generally and the counties around it were among those with larger adjustments since the start of the year.

This leads on to perhaps a more interesting question – how have counties fared since their property prices peaked? To do that, I’ve set up another Manyeyes dataset (which anyone can access) with the percentage gap between house prices in a given quarter and the peak, for each county. Where a county is sandy coloured, that means it has peaked. The deeper the blue, the bigger the fall. (One little trick with these figures is that for a county’s earlier “blues”, prices are still going up. By the second row, that’s no longer an issue.)

Change in asking prices from the peak, 2007-2009

Change in asking prices from the peak, 2007-2009

A couple of findings emerge, based interestingly on alternate axes of the country:

  • East peaked before west, on average, and by almost six months. If you draw a line from Cavan down to Wexford, 10 of the 13 counties peaked in the first half of 2008, more than half the country in population terms, including all of Dublin and its offshoots. Cork, Galway, Limerick and a few other counties actually peaked in the second half of 2007, while a couple of stragglers – Tipperary and Westmeath to be precise – only peaked in early 2008. (Interesting to note, in passing, their sellers’ totally different reactions to conditions in late 2008, as per the first chart above.)
  • North is falling faster than south, on average. If you draw a line from Dublin over to Galway, 9 of the 10 worst affected counties so far come from that half of the island. The top half of the property market – literally! – has been lopped off more than the bottom half. This means that the north-east – essentially Dublin-plus – fell first and is falling hardest, while the south-west – Munster – was last to fall and has fallen least so far. It will be interesting to compare these emerging trends, two years into the property crash, with the final statistics on Ireland’s property readjustment/crash/Armageddon/return to sanity/fill in name here.

Speaking of writing the history books, perhaps it’s no harm to have a quick look to our left and our right and see how other property markets are faring. Below is a chart of about 20 countries (with two different measures in there for the US, the first is the OFHEO measure, while US* is the Case-Shiller national index). I’ve based this on data posted on the Economist’s website, but have surreptitiously replaced the 2007/2008 ESRI data, about which there is a lot of scepticism currently, with data. The bars show the annual rate of change in house prices, including a 1997-2008 average, and figures for 2007 and 2008. (As per the Economist website, some of the Q4 08 figures are actually Q3 08 while a couple, including Ireland, are Q1 09.)

International comparison of property markets, 1997-2009

International comparison of property markets, 1997-2009

Replacing the ESRI data with the had the effect of moving Ireland from the “Club of Moderates” such as Denmark and the Netherlands, to the “Bleeding Edge” group with Hong Kong, the UK and the US (at least one measure for the US at any rate). I will do my best to try and track down the original data for this series so that a change-from-peak measure can be contructed as again that may be more instructive than a year-on-year change, particularly in six months time.

In the meantime, though, I’ll leave this up here and ask for any insights, comments or queries, as per usual! Fire away…

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?