The Foxrock, Dishwasher & Gonzaga Effects Modelling Ireland’s property markets

Irish Society of New Economists 2008 Ronan Lyons, Economist, Daft.ie ronan.lyons@daft.ie

Friday, October 10th,

Ireland's Biggest Property WebsiteJun 24, 2009

Outline of the Presentation
Who are you?

What are you doing here?

When will you stop?

Ireland's Biggest Property WebsiteJun 24, 2009

First, I want to catch you out

Quick survey – which contains the more expensive properties? Foxrock Ballsbridge Howth or or or Blackrock Ranelagh Sutton

Ireland's Biggest Property WebsiteJun 24, 2009

Unbeknownst to most, house prices are falling
500 450 400 350 300 250 200 2005 2006 2007 2008
National Dublin Other cities Rest of country

Ireland's Biggest Property WebsiteJun 24, 2009

There’s too much sloshing around the market
80000 70000 60000 50000 40000 30000 20000 10000 0 J F M A M J J A S O N D J F M A M J J

2007
Flow Stock

2008

Ireland's Biggest Property WebsiteJun 24, 2009

But rents are holding up OK, right? Oh…
105

Ireland
100 95 90 85 80 75 2002

Dublin

2003

2004

2005

2006

2007

2008

Ireland's Biggest Property WebsiteJun 24, 2009

Didn’t he just show this? Oh, this is the rental market
14000 12000 10000 8000 6000 4000 2000 0 2007 Apr Jul Oct 2008 Apr Stock Flow

Ireland's Biggest Property WebsiteJun 24, 2009

Tell me something I don’t know

How does one go about modeling the Irish property market?

Ireland's Biggest Property WebsiteJun 24, 2009

The whole thing is really quite straightforward
regress lprice rm1 D2TBar Docklands West_Centre ht1_rm1 ht3_rm1 ht45_rm1 ht6_rm1 beds1_rm1 beds2_rm1 beds4_rm1 beds5_rm1 rm2 d5artane d5other d7cabra d7phibstoney d7other d9bmont d9drumc d9santry d9other d11glasn d11finglas d13baldon d13howthsut d13other d17coolock d15cknock d1517other ht1_rm2 ht3_rm2 ht45_rm2 ht6_rm2 beds1_rm2 beds2_rm2 beds4_rm2 beds5_rm2 rm3 d4sandym d4other d6RRR d6dartmill d6west d8liffey d8other d10bfermot d12crumlin d12drimnagh d12other d14rathf d14dundrum d14other dublin16 d24fhouse d24tallaght d24other ht1_rm3 ht3_rm3 ht45_rm3 ht6_rm3 beds1_rm3 beds2_rm3 beds4_rm3 beds5_rm3 rm4 Skerries Rush Lusk Donabate Swords Malahide Pmarnock Near_city NW_county ht1_rm4 ht3_rm4 ht45_rm4 ht6_rm4 beds1_rm4 beds2_rm4 beds4_rm4 beds5_rm4 rm5 City_Coast Stillorgan_etc DunL_etc Killiney_etc Sandyford Far_South_Co Leopardstown_etc Dublin_Mountains ht1_rm5 ht3_rm5 ht45_rm5 ht6_rm5 beds1_rm5 beds2_rm5 beds4_rm5 beds5_rm5 Tyrellstown Clonee Clonsilla Ongar Palmerstown Lucan_adam Chapelizod Clondalkin Mid_M50 SW_Dublin ht1_rm6 ht3_rm6 ht45_rm6 ht6_rm6 beds1_rm6 beds2_rm6 beds4_rm6 beds5_rm6 rm7 Cork_sub Cork_comm ht1_rm7 ht3_rm7 ht45_rm7 ht6_rm7 beds1_rm7 beds2_rm7 beds4_rm7 beds5_rm7 rm8 Galway_sub Galway_comm ht1_rm8 ht3_rm8 ht45_rm8 ht6_rm8 beds1_rm8 beds2_rm8 beds4_rm8 beds5_rm8 rm9 Lim_suburbs ht1_rm9 ht3_rm9 ht45_rm9 ht6_rm9 beds1_rm9 beds2_rm9 beds4_rm9 beds5_rm9 rm10 ht1_rm10 ht3_rm10 ht45_rm10 ht6_rm10 beds1_rm10 beds2_rm10 beds4_rm10 beds5_rm10 rm11 ashbourne dunboyne_clon trim laybetty LN_MH_n kells MH_nt Maynooth Celbridge Leixlip Kilcock naas KE_tn newbridge LN_KE_s athy KE_nt greystones bray WW_tn LN_WW_s arklow WW_nt drogheda dundalk LH_nt ht1_rm11 ht3_rm11 ht45_rm11 ht6_rm11 beds1_rm11 beds2_rm11 beds4_rm11 beds5_rm11 rm12 p_arlington LS_nt athlone mullingar WH_nt tullamore edenderry OY_nt LD_t lford_nt ht1_rm12 ht3_rm12 ht45_rm12 ht6_rm12 beds1_rm12 beds2_rm12 beds4_rm12 beds5_rm12 rm13 enniscorthy newross gorey WX_nt KK_c kkenny_nt CW_t CW_nt ht1_rm13 ht3_rm13 ht45_rm13 ht6_rm13 beds1_rm13 beds2_rm13 beds4_rm13 beds5_rm13 rm14 killarney listowel KY_nt tram_dung WD_nt mall_midl macr_band bantry ckilty ymcf cork_nt ennis shannon CE_nt newc_west LK_nt ros_nen_thr clonm_TPt TP_nt ht1_rm14 ht3_rm14 ht45_rm14 ht6_rm14 beds1_rm14 beds2_rm14 beds4_rm14 beds5_rm14 rm15 tuam loughrea clifden galway_nt castlebar ballina westport MO_nt RN_t RN_nt SO_c SO_nt carrickos LM_nt ht1_rm15 ht3_rm15 ht45_rm15 ht6_rm15 beds1_rm15 beds2_rm15 beds4_rm15 beds5_rm15 rm16 bb_stran DL_nt CN_t CN_nt mon_cmacross MN_nt ht1_rm16 ht3_rm16 ht45_rm16 ht6_rm16 beds1_rm16 beds2_rm16 beds4_rm16 beds5_rm16 bb1m bb2m bb32 bb3m bb41 bb4m bb51 bb5m rm1feb rm2feb rm3feb rm4feb rm5feb rm6feb rm7feb rm8feb rm9feb rm10feb rm11feb rm12feb rm13feb rm14feb rm15feb rm16feb rm1mar rm2mar rm3mar rm4mar rm5mar rm6mar rm7mar rm8mar rm9mar rm10mar rm11mar rm12mar rm13mar rm14mar rm15mar rm16mar, hc3

Ireland's Biggest Property WebsiteJun 24, 2009

Honestly! You just have to think in 5D
regress lprice … rm2 d5artane d5other d7cabra d7phibstoney d7other d9bmont d9drumc d9santry d9other d11glasn d11finglas d13baldon d13howthsut d13other d17coolock d15cknock d1517other ht1_rm2 ht3_rm2 ht45_rm2 ht6_rm2 beds1_rm2 beds2_rm2 beds4_rm2 beds5_rm2 … bb1m bb2m bb32 bb3m bb41 bb4m bb51 bb5m … rm2feb … rm2mar …, hc3 Legend: Basic Location House type Bedrooms Bathrooms Time

Ireland's Biggest Property WebsiteJun 24, 2009

Tell me something I don’t know

How does one go about modeling the Irish property market? We can start to find out just how much people value certain aspects of their house

Ireland's Biggest Property WebsiteJun 24, 2009

The Foxrock Effect…
Three-bedroom semi-detached house, two bathrooms, Q3 2008 Mini-market (Posh!) Dublin 4 (Non-posh!) Dublin 4 Sandymount Dublin 2 / Temple Bar Rathmines, Rathgar, Ranelagh Dartry, Milltown Dun Laoghaire & close-by Killiney Blackrock Dublin 14 Howth, Sutton Average price €926,571 €564,493 €882,599 €844,536 €798,679 €783,526 €739,240 €704,120 €670,295 €666,975 €648,223 Premium over Lucan 188% 76% 175% 163% 149% 144% 130% 119% 109% 108% 102%

Ireland's Biggest Property WebsiteJun 24, 2009

The dishwasher effect…
70 60 50 40 30 20 10 0 -10 -20 -30 -40 2006 q1 2006 q3 2007 q1 2007 q3 2008 q1 2008 q3 Garden Microwave Dishwasher Dryer Washing Machine Cable TV Alarm Heating Parking

Ireland's Biggest Property WebsiteJun 24, 2009

The Gonzaga effect
Location detached

4-bed semi-d

5-bed

Premium

South Dublin €1,094,956

€742,669 29.5% €1,417,426 €1,100,096 €1,204,742 €1,340,602 €1,151,335 0.5% 10.0% 22.4% 5.1%

Top 10 rank school €961,389 Rank 20-50 school Dearest (€4000+) €746,155 €817,133

Tier 1 (combination) €909,282 Tier 2 (combination) €780,909

Ireland's Biggest Property WebsiteJun 24, 2009

I didn’t just make it up…
Location

4-bed semi-d

5-bed detached Premium €1,094,956 16.1% 3.1% 4.3% 4.0% 15.2% 1.9% 16.5% 2.2% 8.4% -0.5%

South Dublin Top 10 rank school <1km 1-2km Rank 20-50 school <1km 1-2km Dearest (€4000+) <1km 1-2km Tier 1 (combination) <1km 1-2km Tier 2 (combination) <1km 1-2km

€742,669 €861,963 €765,558 €774,709 €772,330 €855,575 €756,628 €865,534 €759,006 €805,412 €739,131

€1,270,838 €1,128,702 €1,142,195 €1,138,687 €1,261,419 €1,115,537 €1,275,836 €1,119,043 €1,187,462 €1,089,829

Ireland's Biggest Property WebsiteJun 24, 2009

Hopefully I caught at least one person out

Quick survey – which contains the more expensive properties? Foxrock Ballsbridge Howth or or or Blackrock Ranelagh Sutton

Ireland's Biggest Property WebsiteJun 24, 2009

Tell me something I don’t know

How does one go about modeling the Irish property market? We can start to find out just how much people value certain aspects of their house So just how screwed is our property market?

Ireland's Biggest Property WebsiteJun 24, 2009

Probably best to stay clear of Leitrim condos…
Houses for sale, per 1000 people 35 30 25 20 15 10 5 0 Dublin Leinster Munster ConnachtUlster 2007 01 2008 07 Throughput

Ireland's Biggest Property WebsiteJun 24, 2009

Property earns less than a Rabo account
4.0%

3.5%

3.0%

2.5%

Dublin Other Cities Rest-of-country

2.0% 2006 q1 2006 q2 2006 q3 2006 q4 2007 q1 2007 q2 2007 q3 2007 q4

Ireland's Biggest Property WebsiteJun 24, 2009

Let me just take out my crystal ball…
The Low Road

The Middle Road

The High Road

  

 US housing market  Aggressive Fed cuts US housing market crashes & growth remains in lull and revitalize US housing stops, world economy drags Ireland’s down market and economy, enters recession, and with it, but overall with knock-on effects Ireland’s housing strength of global for Ireland’s property market and economy economy keeps and exporting sectors mirror the US Ireland’s exporting  Net migration into sector growing Net migration into Ireland steady to high  Net migration into Ireland stops Production of about 10 years’ supply in 3/4 years places downward Ireland steady pressure on average rents to a greater extent than house prices, which are more determined by confidence, and rent outcomes depends on net migration  By end-2009: By end-2009:  10% further rise in  By end-2009: 10% fall in rents rents  5% further rise in  5% net rise in house 20% further fall in rents house prices prices  10% further fall in house prices

Ireland's Biggest Property WebsiteJun 24, 2009

If we had the choice, which road would we take?
4.0%

3.5%

3.0% High road Medium road Low road 2.0% 2006 q1 2006 q2 2006 q3 2006 q4 2007 q1 2007 q2 2007 q3 2007 q4 2008 q4 2009 q4

2.5%

Ireland's Biggest Property WebsiteJun 24, 2009

Thanks!

Ireland's Biggest Property WebsiteJun 24, 2009

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