McWilliams vs Murgatroyd

Why have a two handed economist when you can have two one handed economists? (my jokes deteriorate in quality by the day)

Today there are two very different opinions on the property outlook in Ireland from two very different commentators, first up is David McWilliams who wrote a piece in today’s Independent, where he says the nation is a ‘Bankocracy‘ and that property prices have much further to fall – to the tune of a further 45% according to his figures (saying that current avg. prices are €250k and they should be c. €135k). He implores people to look at the fundamentals of the market and price via yields [disclosure: we support his valuation approach, it was the basis of our investor reports].

McWilliams is probably right, the market is not at the bottom, having said that, there is no metric which can gauge bottoms, even in stock analysis you can use Fibonacci numbers or Bollinger’s to look for trends or turning points, but there is no hard and fast method, the truth lies in the market, and we will be long past the turning point by the time we realise it. The piece in the Indo primarily takes a swipe at the government and the banks, and he ends with a line saying ‘now is the time to buy’ is a line from the sellers, which is actually inaccurate, the time to buy is being determined on the buy side of the transaction, in a market of hardened credit criteria, decreased credit, high unemployment and an uncertain employment future, it simply doesn’t ring true to believe that there are gullible buyers running in with their eyes closed, any transactions are occurring due to a consensus on the buy side, not the other way around.

That is one hand of one economist.

On the other is Paul Murgatroyd who did research on behalf of myhome.ie, his findings say that 58% of first time buyers intend to buy in the coming 12 months. Nearly half of the first time buyers have mortgage approval (48%), almost a third are seeking it (31%), that about four fifths have a deposit (78%) and that 72% of the first time buyers with a deposit saved it (which equates to about 56% of first time buyers).

Of the first time buyers who aren’t going to buy (the other 42% making up 100% when you add them to the 58% that say they will be buying), 37% (15.5% of the 100%) say that falling property prices are the reason, while 43% (18% of 100%) say that current economic outlook is holding them back.

The bulk of first time buyers are looking for a 3 bed semi – we would agree with this, our opinion of ‘non-apartment second hand properties in cities’ as being the only market with any action fits well with those findings. The bulk of whom are looking at houses priced less than €350,000 (71%)

I won’t argue with the interpretation of the data, the sole issue we have is ‘how do you quantify the first time buyers in any market’, is it the people in Ireland above 18yrs old and below 50 (which was the former CIF ‘buyers demographic’) who don’t own a home? Is it the people who identify themselves as first time buyers? And of them, how many answered the questions? How large is the sample pool? How many are not in the sample now that were last year but dropped out due to job loss? The fact is that we’d want to know more before we are convinced, and that is a purely professional critique as opposed to finding any fault with the rest of the research or the researcher in particular.

We have seen a large increase in the number of applications we are receiving, they are not passing through to closings (yet) in any meaningful way, and many people are quite happy to continue renting. There is an advantage in micro-data which Murgatroyd obtained, often it is a lead indicator that will give guidance long before it plays through to the macro picture, for that reason you can’t discount it, having said that, the report reads bullish in our opinion and we don’t feel that there is cause to be bullish in the current market.

The interesting thing is the divergence of views on an identical topic, that of the current Irish property market, ultimately people will believe what they want to believe, but it is important to realise that any argument has inherent flaws in it, and in fact the truth probably lies somewhere in between (now I’m the one with two hands!).

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