Cantillon: When is a housing recovery real?

Nobody (one hopes) wants to talk up residential property prices to dangerous, cliff-falling-off levels again but it seems to be undeniable that a little bit of a revival is occurring in the housing market, in Dublin at least. Depending on where you stand in the great merry-go-round, Tuesday’s figures could either be very good or very bad news. At the extremes, they will generate guarded optimism for the thousands of homeowners trapped in negative equity, while for the unquantified hordes (or maybe not) of house-hunters, they may be the source of panic.

The CSO found that residential prices climbed for the fourth month in a row in July and are now 2.3 per cent higher than a year ago, although this average masks differing performances for houses and apartments and, more notably, for property in Dublin and outside.

Economists are sensibly hesitant to proclaim a bottom for the market, with Davy’s experts noting that the CSO’s reliance on mortgage-based purchases makes its data pool relatively small. The broker observes that last year, just 0.7 per cent of the State’s housing stock was “transacted” through mortgage lending and says a more “normalised” level would be close to 3 per cent. Cash buyers, furthermore, accounted for about half of purchases in the second quarter of this year – hardly a sustainable position.

On top of this, we have supply squeezes pushing up prices in certain parts of the country (again, notably in Dublin) but no movement on repossessions and the release of these homes on to the market. In brief, a lot of pieces still need to fall into place before a true picture of a housing market can emerge.

In this vein, Goodbody asked yesterday: "When is a recovery real?"

The broker was a little vague on the answer, but did suggest that recoveries on low volumes are “ultimately unsustainable”. Goodbody concluded by urging us not to get carried away by the latest data – perhaps the most sensible approach of all.