Abstract
Housing is central to the broader economy, as highlighted by the Great Recession of 2007–2009, yet few reliable long-run series exist for sale and rental prices of housing. Using hedonic methods, frequency conversion techniques, and a detailed dataset of over one million sale and rental listings from newspapers and online, we construct new indices of sale and rental prices from 1945 for Dublin, Ireland as a whole and for six sub-markets within the city. Sale prices rose by an average of 8.4% per year between 1945 and 2018, compared to an increase in general consumer prices of 5%. Market rents are estimated to have increase by 6.3% per year, well above prior estimates (4.4%), a finding with implications for accurately measuring living costs and living standards in Ireland since World War II. There is some evidence of rents converging across markets within the city but sale prices have diverged over the same period. Adjusting for inflation, there have been four major housing market cycles since 1945, with peaks in the late 1940s, the early 1970s, the early 1980s and the mid-2000s. The presence of both sale and rental information allows the calculation of the ratio of sale to rental prices for housing, the housing price ratio, a fundamental barometer of housing market health. We identify three phases in the gross yield on Irish housing since 1945, with downward shifts in the yield in the early 1970s and mid-1990s. An error-correction econometric analysis confirms the predictions of economic theory, that credit conditions in the credit market and user cost drive changes in the yield over time.
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Notes
For an overview of existing data series for many countries, including descriptions of their limitations, see Knoll et al. (2017).
To this may be added Deeter et al. (2017), although their series ends in 1949 and for the twentieth century covers properties that had largely switched from residential to commercial usage.
This can be relaxed by including properties with no known size information as a separate category, without affecting the overall results substantively. Unusually large properties (for example, where bedroom number is known to be above six) are treated separately, typically with a coding of 9. Again, these can be excluded without affecting the results substantively.
The same techniques can also applied to the annual city-level analysis to produce indices at quarterly frequency; these results may be useful for those conducting macroeconomic analysis at quarterly frequency and are available from the authors on request.
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Acknowledgements
We would like to thank the reviewers and the editor for very helpful feedback that greatly improved the text and Finn McLaughlin and Sean Moran for their excellent research assistance. We would also like to thank the following for their valuable contributions in building the dataset used here: Kerri Agnew, Garrett Doocey, Patrick Ferguson, Silvia Gallagher, Samuel Logan, Sean McKiernan, Niall Murphy, and Andrew Salter.
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Keely, R., Lyons, R.C. Housing Prices, Yields and Credit Conditions in Dublin since 1945. J Real Estate Finan Econ 64, 404–439 (2022). https://doi.org/10.1007/s11146-020-09788-z
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DOI: https://doi.org/10.1007/s11146-020-09788-z