Davy Research |
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Property Auction Results
Auction data point to peak-to-trough declines of 60%
04 May 2012
David McNamara |
Conall Mac Coille, Chief economist |
Allsop auction results point to 60% declines
Collated data from the two Allsop property auctions held in 2012 indicate that prices are down 60.2% from peak.
This evidence is consistent with our recent house price report, Irish housing market - "Affordability returns to sustainable levels, but credit constraints and uncertainty point to further declines," in which we set out our view that prices will eventually trough 65-70% from peak.
We still expect Irish house prices to undershoot long-term sustainable levels due to uncertainty and constrained credit availability.
Additional evidence that CSO index understates true declines in the Irish property market
The CSO index omits cash purchases and may not capture sufficient transactions in rural areas.
The majority of purchasers in Allsop auctions (72% up to March) are cash buyers, and auction data may be a more timely indication of market prices.
The Allsop data indicate that properties outside Dublin are transacting well beyond 60% price declines.
Property demand at the right price and yield
Of the 97 properties in the latest auction, 88 were sold (91% of total). This generated €12.9m in sales.
This follows the March auction sales of €12.4m.
Average rental yields in both auctions were 8.9%.
But credit conditions will limit any recovery
With just €2.4bn of mortgage lending in 2011, a fall from peak of €39bn, credit remains constrained.
Restricted credit availability for first-time buyers and movers is preventing these investors from taking advantage of attractive rental yields.
Please refer to important disclosures at the end of this report.