Launch of new Residential Property Price Index (RPPI)

  1.1    Overview

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).

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

 1.3.1  Coverage

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).

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).

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:

• Dublin City
• Dún Laoghaire-Rathdown
• Fingal
• South Dublin

Seven new regional house price indices are being provided for the rest of Ireland:

• Border (excluding Co. Louth)
• Midland
• West
• Mid-East (Co. Louth)
• Mid-West (including South Tipperary)
• South-East (excluding South Tipperary)
• South-West

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).

• Ireland (excluding Dublin)

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).

1.6  Exclusions

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.

1.8   Further information  

Further methodological notes on the new index are available in the Background Notes.

The new RPPI detailed results and the additional indicators are available here