300 years of property booms and busts

Prices tell stories. We have all heard the one that starts with “Back in my day”, then describes what petrol or sweets or a house cost years ago. In the past 15 years, both before and since the recent property crash, housing featured strongly in such conversations. But in relation to our homes we have usually relied more on folk memory than on hard information. Reliable statistical data wasn’t available in usable form before 1970.

For the past two years, however, Frank Quinn of Blackrock Further Education Institute and I have been collecting information to create a price index of Dublin city. We have been helped by David Duffy of the Economic Social Research Institute. We have traced house prices on 10 Dublin streets over a period of 300 years.

We have learned that Ireland has a strong tradition of devastating housing outcomes. Our last one was merely the most recent, but it perhaps wasn’t the worst.

We trawled through more than 20,252 memorials – which is to say deeds – in the Registry of Deeds, at the top of Henrietta Street in Dublin 1, out of the five million or so held there. They were usually at least five pages long and were often illegible. Many were written on calf-skin vellum pages, and many made no mention of prices.

We found homes bought and sold by historical figures, including Arthur Guinness, Charles Stewart Parnell, Daniel O'Connell, Thomas (Buck) Whaley and Jonathan Swift. The core story, though, is that of ordinary people who leased and bought homes in Dublin city, riding the same market ups and downs that we all face today.

Fortunes were made and reversed, some of the poshest neighbourhoods went on to become tenements, the city moved out towards the sea, and prosperity moved from the north side of the Liffey to the south.

As for crashes, the housing market was devastated in the first half of the 20th century. The crash in real values from 1906 to 1947 was almost 88 per cent.

In property, things can go badly for a very long time. In real values, property cost less in 1944 than in 1744. By comparison, our most recent crash was more about the spectacular boom that preceded it.

We are finalising a working paper that looks at some of these issues. It is the first house-price index to cover Irish prices over this period. (It follows work by Kevin O’Rourke of Trinity College Dublin and Oxford in the early 1990s.)

We believe that research like this can help us avoid repetitions of a now well-established pattern of booms and busts.

The data was in the Registry of Deeds, and we worked out the method on site, as we learned how the information was stored.

The first step was to trawl through index books of street names and index numbers, sometimes in no particular order. We wrote down the book number, page number and reference of every transaction from 1708 onwards, on the 10 chosen streetsin central Dublin: Parnell Street, Capel Street, Usher’s Quay, Merchants Quay, Bachelors Walk, Meath Street, Patrick Street, South Anne Street, St Stephen’s Green and Henrietta Street. Some of the names changed – Parnell Street was Great Britain Street.

We then went to another room, to examine the memorial of the deed (known as a tombstone) and so learn about the property transaction. At the end of the summer of 2013 we began reading the underlying deeds of almost 10,000 records.

There were complications. House numbers didn’t exist until the late 18th century; instead the records carry descriptions such as “the house beside the house where John Smith currently dwells” or “the house where John Murphy previously dwelt”.

Many sales occurred in lots: a buyer would buy a property on Patrick Street, say, but also 20 acres in Roscommon and properties in Cork, for a total of £700, preventing us from figuring out how much the property on Patrick Street was valued at.

In the years 1950-69, because of changes in the way records were kept, we couldn’t use the Registry of Deeds any more, and had to work instead in the Valuations Office to trace the names, because the relationship of asking prices to selling prices at that time is unknown.

Ups and downs

We expected that house prices would go up when the Irish economy was doing well and fall when the economy was in recession. It wasn’t quite that simple.

The nominal price – the price a place sold for – and the “real” or “inflation-adjusted” price were often two different things. This is important: adjusting for inflation gives you a truer idea of cost; the nominal cost is just what’s on the price tag.

The early 1700s show little increase in nominal house prices, which would appear to match the sluggish nature of that time, as famines in the 1720s and 1740s stifled growth. Our house-price index then showed large nominal and real growth for the second half of the 18th century. This is a common theme: inflation regularly rushed far ahead of house prices in the past.

We expected a fall-off in house prices at the start of the 19th century, following the 1801 Act of Union, but we found that nominal house prices performed very well – and remained strong until a difficult decade in the 1820s. But in real terms they fell as general inflation outstripped them.

During the Famine decade of the 1840s average prices fell to levels not seen since before the boom of the 1790s. Strangely, in real terms they performed well as the economy collapsed, showing that property can act like a store of value in the most difficult of times. In the 1850s we had a historical equivalent of the National Asset Management Agency called the Landed Estates Court, which managed bankrupt estates after the financial wreckage of the post-Famine years. And we had property-based bank failures in the 1880s.

Recovery came later in the 19th century, and house prices at the end of the century were almost exactly where they had been 100 years earlier.

The start of the 20th century shows nominal prices taking off, particularly after the first World War, but much of this increase is down to high inflation.

These new price levels are largely maintained during the 1920s and 1930s, with only minor increases. Finally, we end up at the 1940s, when nominal house prices increased to about seven times what they were back at the start of our study, in the early 1700s.

In real terms, this first half of the 1900s saw the most prolonged destruction of property value we’d ever had: almost 50 years of decline.

Our most recent boom defies comprehension, but, as it’s the chapter many of us know so well, we won’t try to explain that one today.

300 Years of Dublin House Prices: Boom and Bust from 1708 to 2015 is by Karl Deeter (Irish Mortgage Brokers), Frank Quinn (BFEI) and David Duffy (ESRI)