15 Nov 2019
Irish Economy: Property price inflation continues to slow
The latest data on residential property prices from the CSO for September show a continued slowing in annual price inflation.
Prices in September were 1.1% higher y/y, which is the slowest rate of annual growth since price growth turned positive in June 2013. However this slowdown primarily reflects price weakness in late 2018 and early 2019, and the picture has been more positive since then. Prices are +2.2% in the past six months (compared with -1.0% in the prior six months) and the m/m increase of 0.1% in September, although marginal, was the seventh successive monthly gain. Looking at regional variations, property prices in Dublin are showing little clear direction at present with prices in September marginally lower m/m (-0.1%) but +1.4% in the past six months. Dublin prices are now -1.3% y/y but, again, this decline reflects a weaker market between November and March when m/m price growth was negative for five successive months. Outside of Dublin, price growth has remained positive but has moderated to +3.6% y/y.
The latest data indicate that we are in a period of relative price stability at present which, given recent experiences in this country, cannot be a bad thing.
Irish homebuilders: Reports of the death of the supply response have been exaggerated
Data on New Dwelling Completions show that 5,667 housing units were completed in Q319, +22% y/y and the highest quarter of the current series (which starts in 2011).
This is a welcome return to strong growth in completions given that growth of 10% y/y in Q219 was a disappointment and the lowest rate of growth since 2013. A significant driver of the increase in Q319 was a jump in the number of apartment completions which, at 1,083 units, was more than 40% higher than the previous highest quarterly total since 2011. This is positive and perhaps an early indicator that the apartment design standards that were changed last year to stimulate supply are having the desired effect. Looking at the data on a four-quarter moving sum basis, given that they can be “jumpy” from quarter to quarter, total housing completions in the year to end-Q3 were above 20,000 (at 20,249) for the first time since output began increasing five years ago, and 19% higher than for the same period of last year. If this growth rate is maintained in Q419, total housing completions will reach almost 21,300 this year, slightly ahead of our forecast of 21,000. While still well behind the low point of demand estimates, the momentum has turned back in the right direction.
One further point to note is that regional variations continue to be significant. 4,868 units were completed in Dublin in the first three quarters of the year, which is a paltry increase of just 28 units (0.6%) on the same period of last year. In contrast, completions were +42% over the same period in the four counties which comprise the remainder of the Greater Dublin Area (and +52% y/y in Q3 itself). A significant theme of the ESRI’s housing market conference this week was the need (from a social, economic, infrastructure and sustainability perspective) to make efficient use of our land resources and prevent urban sprawl as we look to cater for significant projected population growth in the coming years and decades. On the basis of the latest evidence, this need is becoming more urgent.
Germany dodges “technical recession”
With less dovish remarks from the Fed chair, Jay Powell during the week and more upbeat US/China trade news the dollar has spent the last fortnight slowly moving higher against a basket of currencies. As a spate of consistently anaemic European economic data prints have continued to roll in, the benchmark EUR/USD rate (in particular) has had a tough fortnight, shedding almost 200 points (from highs of $1.1175 on Nov 1st) only to grind to a halt just below the pivotal $1.10 level ahead of some eagerly awaited German data yesterday morning.
It was fully expected that German growth data was to show a second consecutive quarterly negative print which would have put the country into a technical recession. That was not to be as an unexpectedly positive +0.1% GDP print (vs. a -0.1% print forecast) following the -0.2% contraction in Q2.
We have some key European and US data due out later today in the shape of (October) final Euro CPI data and US retail sales. It’s rare that the Euro CPI print will shock but markets are looking for a decent beat on Septembers US retail sales negative print. Key EUR/USD technical levels to look out for are $1.0990, $1.0880 (support) and $1.1090, $1.1180 (resistance). EUR/USD is sitting in/around $1.1025 as we go to print.
Farage to fight Labour
Brexit party leader, Nigel Farage, yesterday confirmed that he will put forward a candidate in every Labour held seat in the upcoming UK general election on December 12th. Earlier in the week, Mr. Farage had given assurances that none of his party members would stand in the seats that the Tories had won in the previous 2017 election. Tory fears now are that the Brexit party will be fighting the seats that they (Tories) need to take from the Labour party so as to gain that crucial majority in parliament.
In UK data news, UK retail sales (released yesterday) fell by 0.1% in October, defying market expectations for a 0.2% rise and our own forecast for a bigger 0.4% increase. That left the annual rate steady at 3.1% (y/y). Stripping out fuel sales the reading was weaker still, down 0.3% on the month, though still 2.7% up year-over-year. Sterling reaction was muted to say the least.
EC 10.00 CPI YoY
US 13.30 Retail sales
US 14.15 Ind. Production