Home truths of a housing market that makes 17 millionaires a week
An examination of housing wealth shows property is our largest expense and greatest asset, writes Ronan Lyons
Property matters. Accommodation is the biggest chunk of our spending as consumers - not just in Ireland, but in most high-income countries.
And real estate is typically the biggest asset on our balance sheets. About two thirds of households in Ireland own the home they live in. For them, their dwelling is both something they get use out of every day and something that they may be able to depend on later to provide for them or their loved ones.
The average property nationwide was worth almost €257,000 in the third quarter of 2018, up from a low of €165,000 in early 2013. Accounting for the new homes built since the last census, there is now almost €450bn of housing wealth in Ireland.
This is more than twice the combined market capitalisation of the 50 or so firms listed on the Irish stock exchange. And our housing wealth is also larger than our annual income: Irish GDP was estimated to be just under €300bn in 2017. Something to remember when people call for a wealth tax!
Unsurprisingly, the country's housing wealth is concentrated in cities. Urban Dublin makes up less than 1pc of the land mass of the country but is home to more than 40pc of its housing wealth. The other four cities bring the urban share to roughly half. This is perfectly normal and indeed probably less stark than other countries, where greater populations drive even greater land values in the most desirable locations.
Changes in housing wealth can tell us about important changes underway in the economy. Donegal now has two of the cheapest 10 markets in the country, with the Lifford/Raphoe area joining Bundoran in that list. This tallies with other evidence that Brexit-related uncertainty has taken its toll on the northern market.
The Daft.ie Report typically thinks of the country as broken up into 54 different markets: the 22 postal districts of Dublin, North, South and West Dublin, the four other cities, and then the 25 other counties (excluding the city areas).
The big gainers over the last five years remain previously unfashionable areas in the Greater Dublin area: Dublin 1, Dublin 8 and Dublin 10 now rank nine, eight and 17 places higher in the list of 54 markets around the country, compared with five years ago. Westmeath and Louth - both in Dublin's commuter belt - rank nine and seven places higher.
The markets that have slipped down the rankings are Tipperary, Co Limerick, Kerry - and Donegal. These markets are up to 10 places lower in the rankings than five years ago.
The report also provides an estimate of the total number of property millionaires in Ireland. For each of the 389 micro-markets in the country, the average value of 25 main property types - from one-bed apartments to five-bed detached houses - is calculated. Of those almost 10,000 property segments around the country, 56 had an average value of at least €1m - up from 43, 18 months ago.
To take one example, the South Dublin mountains - including the area of Rathmichael - has joined the ranks of the country's most expensive markets. It is estimated that there are now almost 200 dwellings worth a million or more in the area.
Using census information and the Daft.ie listings archive, it is estimated that there are in total almost 5,300 property millionaires across these 56 market segments. Being based on averages, other exceptional properties scattered around the country are not included. Nonetheless, compared to 4,850 millionaires six months ago, it suggests that the housing market is creating 17 new property millionaires each week!
A quick word on the methodology we use.
The Daft.ie Wealth Report is based primarily on the output of hedonic price regressions, which reveal average property values for particular classes of property. This can be broken down by period, location and dwelling attribute (such as size or type).
To calculate average prices by city or county, these averages by class are weighted by the class frequency to give a meaningful average price by location.
For example, Dublin 1 will be more weighted to one-bedroom apartments than Leitrim, which will be weighted more towards four- and five-bedroom bungalow and detached properties.
The same methodology allows an estimate of the total number of property millionaires in Ireland, as follows: for each of the 389 micro-markets in the country, the average value of 25 main property types, from one-bed apartments to five-bed detached houses, is calculated, giving the average value for almost 10,000 property segments.
The number of property millionaires was calculated by focusing on the 56 segments where the average property value was at least €1m and adding up, based on census information and the Daft.ie listings archive, the total number of dwellings in this segment.
The Property Price Register was used to calculate the most expensive streets, with exclusions based on transactions concerning sites for development or containing multiple units.