Tuesday 24 October 2017

Why price per square metre matters

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Ronan Lyons

Just as every generation likes to think it's unique, so too every country believes it's different. Clearly, the Americans know they're different from everywhere else - and the same can be said for our British neighbours. But we Irish are also convinced that we're different.

One of the oft-mentioned differences is about our attachment to land and property. There are a number of variants to this story. But they ultimately all come back, one way or another, to blaming the English.

Whether it's the Great Famine, the Land Acts or just the old '800 years of oppression' trope, many Irish people believe that we are uniquely attached to the land. This apparently innate desire to own our homes explains, or so goes the argument, our unusually high homeownership rates.

But what if I told you that was all a lie? Ireland has one of the lowest homeownership rates in Europe. It has been falling since 1991, when it was at 82 per cent and was just 69 per cent in the 2016 Census. Just seven countries in Europe, out of the 28 for which information is available, have lower homeownership rates than Ireland.

So, Ireland is not an outlier when it comes to owning a home - at least not an outlier the way most Irish people think we might be. But one area where we are an outlier is in how we think about the price of our homes.

Perhaps unique in the European Union, with the partial exception of soon-to-be former member, the United Kingdom, Irish consumers do not think in price per square metre - or even price per square foot. This is not some cultural barrier, with Irish people unable to think in such terms. Irish men and woman who buy or rent office space for their business will happily think in terms of this metric then, but dutifully ignore it when buying or renting their own home.

Some of this may simply come down to leadership. Those in charge of the sector should lead the consumer, when it comes to improving how the housing market works. This was definitely the case with Building Energy Ratings five years ago and it is likely to be the case with the price per square metre too.

Hopefully, this is set to change. A new report on the housing market, by the Institute of Professional Auctioneers & Valuers (IPAV), is published today on these pages. In addition to barometer metrics of the 'heat' of the price of particular property types, the report also includes average price per square metre for the first half of the year. This is broken down by county and postcode, and by property type.

Thus we can see that the average price per square metre varies dramatically by location and type. Among two-bedroom apartments, the average price per square metre is less than €700 in Longford but above €5,300 in South County Dublin and above €5,500 in Dublin 2.

The price per square metre is typically higher for three-bedroom semi-detached properties than for two-bedroom apartments, with only two markets seeing price per square metre of less than €1,000 for three-beds, Longford and Sligo. In a further four markets - Cavan, Leitrim, Mayo and Tipperary - the price was less than €1,200. But in a number of Dublin areas, including Dublin 4, Dublin 3 and Dublin 14, the average price per square metre was above €5,000.

For four-bedroom semi-detached properties, average price per square metre was similar to the three-bedroom counterpart in most locations, with Cavan and Longford once again the cheapest markets at roughly €1,000. But there is a clear prestige premium at the top of the market, though, with the average price per square metre of more than €7,000 for four-bedroom properties in Dublin 4.

This is the first edition of this report and part of the value of such reports is comparing trends across time. But there is valuable information in comparing across locations. Price per square metre in Cork - at about €2,600 - is significantly above price per square metre in Galway, which is closer to €2,000.

As the Department of Housing looks to build the repository of information it needs, it will be drawing on databases such as the Property Price Register, Residential Tenancies Bureau, and the Building Energy Ratings.

These will give policymakers the wherewithal to better understand what is value in the housing market, including the underlying reasons - such as access to employment - that explain such huge variation in the cost of additional square metres of living space.

Ronan Lyons is assistant professor of economics at Trinity College and author of the Daft.ie Reports

Sunday Independent

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