Tuesday 16 January 2018

End of damned lies on statistics?

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Stock image

BACK in the 1990s, the Department of the Environment (DoE) issued a bulletin telling us house prices were falling in Dublin. Except they weren't. They were soaring. We were heading into what would become the biggest property boom in Irish history - and our own Government was telling us prices were falling.

Scouring the data at the time, I noticed that an unusually large number of new apartments were being sold off the plans - in that year, around 30pc of the homes sold in Dublin were apartments. These tended to be one or two-bedroom abodes and priced a good deal cheaper than houses. I asked DoE officials whether it could be possible that a surge in the number of cheaper homes sold might have had a disruptive effect on the average house price figure. Could they have artificially pulled it down? It turned out that this had been the case. The method by which the data was mined and analysed was subsequently changed to take the apartment distortion into account.

This episode showed that our State-produced house price data was not reliable. On top of this, the DoE stats were released a full half year behind the market - dangerous if ministers needed data to help them react to a sudden upset.

In March 2007, I published a story in a Sunday newspaper asserting that house prices were starting to fall in Ireland. The lack of reliable Government statistics on prices at the time meant that my story relied instead on data supplied by a company which made its money from property advertising online.

Daft.ie, an online web portal whose business would continue to grow in the years ahead, had specialised in advertising rentals, but had expanded to advertising houses for sale also - to such a degree that I deemed its data to be reasonably representative. The story was published under the headline: "First evidence of falling prices." Coverage like this at the time, including George Lee's Boom - broadcast just months before - and Richard Curran's Future Shock programme, screened months later, came in for a barrage of criticism from the heavily-vested property sector - banks, agents of developers and politicians.

The Government was led by Fianna Fail, a party which was heavily funded from the construction and development sector as characterised by the famous 'Galway Races Tent'. Vested sectoral interests were labelling people who talked about a property correction as being "naysayers" - fifth columnists who could damage Ireland's economic prospects by "talking" the apparently thriving economy "into a hole."

The Daft.ie data wasn't perfect because it was based on asking prices - the opening gambit in a bargaining process. Homes rarely achieve asking price - in a declining market, they achieve less; in a rising market, they achieve more. But I judged at the time that the Daft.ie data that showed declining asking prices was enough to confirm that the market was indeed in a downturn.

But again it was the absence of independent, up to date and reliably assessed State-produced housing market data - something provided as a given in every other European country - that gave the vested interests the oxygen to attack reports that appeared from that time detailing a falling market.

It has since emerged that many vested interests knew what was going on and were trying to buy themselves 'bail-out' time.

One estate agency chain (Hamilton Osborne King) silenced its own economist, Derek Brawn, when he tried to issue reports stating that prices had turned downwards. Brawn left his job and would later write a book detailing his experiences. Brawn and others suffered personally because there were no independent and up to date and reliable independent State-produced statistics to back up their claims.

Move on to 2013. Ireland is emerging from the debris. This time stories written by journalists concerning lack of stock, queues at new home schemes and of the threat of an emerging housing crisis are being described as "cheerleading" - this time on behalf of property market interests.

They are not taken seriously by a Fine Gael-led Government. State statistics at this point do not include cash sales, which at the time accounted for more than half of transactions taking place in the market. Based on mortgages drawn down, the stats are also roughly two to three months behind what the market is doing. So once again, in 2013, State statistics are not giving the State an accurate picture at a vital time.

But on Wednesday, the CSO launched a new property price index - the most comprehensive yet - which will produce sales statistics analysing the national market and micro markets right down to Eircode level. The new index includes cash transactions. Its importance to Government policy making, to the market and to the punter cannot be underestimated.

Indo Property

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