Launch of new Residential Property Price Index (RPPI)
A new Residential Property Price Index (RPPI) is being launched for Ireland. The new RPPI incorporates significant methodological improvements over the original RPPI. This new index replaces the original RPPI and involves revisions to the existing series (see Figure 1.1).
The overall price trends for the new and the original indices are similar. However, the trough at March 2013 is lower in the new series, reflecting better coverage of transactions outside of Dublin in particular. The new RPPI indicates that the peak to trough fall in residential property prices was 54.4%, not 50.9% as recorded previously. The price increase from the trough to the latest month (July 2016) is 43.2% using the new RPPI, whereas it was estimated as 37.4% using the original RPPI (See Table 1.1).
|Table 1.1: Revisions to national Residential Property Price Index|
|Original RPPI % change||New RPPI % change|
|Peak to Trough||-50.9||-54.4|
|Trough to Present||37.4||43.2|
|Table 1.2: New and original national Residential Property Price Index, May-July 2016|
|Month||Original (Jan 2005=100)||New (Jan 2005=100)||Difference %|
1.2 Difference between the new and original RPPI
The difference between the original and the new RPPI at national level is driven primarily by differences between the respective sub-indices for houses outside of Dublin. There are only minimal differences between the original and the new sub-indices for Dublin. The latest available comparison for July 2016 indicates that residential property prices are 3.0% lower than originally estimated (see Table 1.2).
The new RPPI price model indicates that cash buyers generally paid less for residential property than mortgage buyers, all other things being equal, over the period 2010 to 2016. This differential was most pronounced when the market was at its lowest and outside of Dublin. However, further research is required to identify and quantify all the factors contributing to the differences between the original and the new RPPI.
1.3 Improvements in the new RPPI
The new RPPI covers all market purchases of houses and apartments by households, both cash and mortgage-based transactions. This coverage (i.e. market purchases by households) is defined in the EU rules for compilation of price indices on Owner-Occupied Housing in the Harmonised Index of Consumer Prices (HICP).
The RPPI is based on stamp duty returns made to the Revenue Commissioners. The original RPPI was based on mortgage data from the credit institutions and, as such, its coverage of the market was less complete. For example, between 2011 and 2015, about half of household property transactions were funded by a mortgage; the percentage was as low as 44.4% in 2013 (see Table 1.3).
|Table 1.3: Stamp Duty Returns versus Mortgages, 2010-2015|
|Year||Stamp Duty Returns (household residential property transactions)||Mortgages1|
|Market||Non-market||Total||Number||% Total household transactions|
|Transactions in New RPPI||Transactions in Original RPPI|
|1: Sourced from Banking Payment Federation of Ireland|
|p: Provisional estimates for stamp duty returns for 2015|
As well as the RPPI, additional indicators for volume, value and average price of all residential property transactions (i.e. not confined to household market purchases) are also being compiled.
As well as improved coverage, the new RPPI uses higher quality data sources and more detailed locational characteristics in the price model. The improvements in accuracy can be summarised as follows:
1.3.3 Breadth of data sources
The primary data source for the new RPPI is the actual sales price recorded on the stamp duty returns (the same data source as the Residential Property Price Register). Other characteristics used in the index model are obtained by linking this information, at transaction level, with other sources. The floor area of the dwellings and the dwelling types are obtained from Building Energy Rating (BER) certification data provided by the Sustainable Energy Authority of Ireland (SEAI). Locational characteristics are obtained from the GeoDirectory (Eircodes) and Census 2011 Small Area Population Statistics (SAPS).
This information is used to calculate a constant quality price index which takes account of the location and other characteristics of the dwelling.
1.4 Constant quality price index
As was the case for the original index, the new RPPI is a quality adjusted price index that measures the price of residential property purchased by households in the residential property market. Quality adjustment compares like with like. The RPPI answers the question how much more would it cost to re-purchase the same ‘basket’ of residential dwellings month-on-month? Unlike the consumer price index, for example, where the same basket of goods can be re-priced directly every month, the mix of dwellings sold varies from month to month. The RPPI uses hedonic regression methods to isolate house price changes independent of physical and locational differences. Without quality adjustment, the RPPI would simply reflect average house prices and would be subject to changes in the mix of dwelling types sold in each month. Such an unadjusted index would not be a stable indicator of trends in residential property prices (see Figure 1.2).
|X-axis label||New RPPI||Average Price|
1.5 New statistical outputs
1.5.1 New sub-indices
The greater number of transactions available for the new RPPI permits a greater level of geographical disaggregation than previously possible. Four new house price indices are being provided for the Dublin region:
Seven new regional house price indices are being provided for the rest of Ireland:
One new apartment price index is being provided (It is not possible to provide further breakdowns for this dwelling type due to the lower volumes of transactions).
These new sub-indices provide further insights into the residential property market, showing for example that house prices in the Dublin City administrative zone are leading the recovery, from the national low point of March 2013, and house prices in the Mid-West region have been slowest to recover in price (see Figure 1.3).
|Dublin City Houses||60.6|
|Dublin All Apartments||54.9|
|South Dublin Houses||49.4|
|Dun Laogh-Rath Houses||38.6|
|Rest of Ireland Apartments||26.2|
1.5.2 Additional indicators
The new RPPI is being launched with an extensive range of additional indicators on the residential property market. There are three core additional indicators;
These are broken down by the characteristics of the buyers, the characteristics of the dwellings and geographical location (region, county and Eircode routing keys).
These additional indicators are provided broken down by two reference dates; the date the transactions were executed and the date the transactions were filed. To allow for late submissions of stamp duty returns, all execution statistics are preliminary and subject to revision until 12 months after the reference month. Filing statistics are not subject to revision and serve as lead indicators for execution statistics. Over the course of a year, numbers of executions and filings are similar (see Figure 1.4)
All additional indicators quoted in subsequent chapters of this publication are based on filing statistics.
In relation to the price indices, purchases of residential property by non-households (private companies, real estate investment trusts, the state sector, etc.) and non-market transactions (family transfers, social housing, etc.) are excluded. However, information on these purchases is included in the additional indicator statistics.
1.7 Timeliness and Revisions Policy
The statutory deadline for submitting a stamp duty return is within 44 days of the transaction being executed. Practically, this means that a minimum of two months must elapse before a full set of transaction data is available for any given reference month (in practice, late returns can delay this further). Rather than delay the new RPPI, the new RPPI will be published within approximately one month of the reference month based on the stamp duty returns filed with Revenue the previous month. Over the latest two months, as more transactions are filed for the reference month, the RPPI will be revised. Therefore, the latest two months of the new RPPI are preliminary results only.