The latest release from the CSO on property prices indicates that residential property prices in Ireland have risen by 0.9% in the month of September. This has led to a report in the ‘Irish Independent’ that there are “hopes the worst is over” (available here). While a slight increase in September was indeed observed, as can be seen in Figure 1, there are more details which need to be considered.
For instance if we look at the regional disaggregated statistics we can see that while prices rose by 2.4% in Dublin, residential property prices in the rest of the country actually decline by 0.1%. As would be expected the largest urban concentration in Ireland has seen the largest rise in prices. What the ‘rest of the country’ statistics likely hide is a similarly large urban rural divide. The rest of the country includes Cork City, Galway City, Limerick City etc. In these large urban areas we might expect that property prices to also recover relatively quickly, as there is a concentration of demand for houses. However, more rural areas are likely to suffer more, especially in instances where there is a lack of local employment to draw people to an area. Given the level of disaggregation available in the CSO statistics it is not possible to be definitive about this; however, research into house prices in the UK conducted by various academics would suggest this to be the case. Therefore, caution should be urged when considering these statistics and we should note that there is likely to be substantial regional variation in the extent to which locations recover, with an oversupply of houses in some locations which will have a downward effect on prices.
Justin Doran is a Lecturer in Economics, in the Department of Economics, University College Cork, Ireland.