THE USE OF LOCATION VARIABLES IN A MIX-ADJUSTED INDEX FOR DUBLIN HOUSE PRICES. ESRI Working Paper No. 138, 2001

The rapid increase in house prices that has occurred in Ireland in recent years has focused attention on the methodology used to measure the change. Traditionally measurement of the change in Irish house prices has been based on an average price compiled by the Department of the Environment. While this is the simplest method it does suffer the drawback that a change in the type of houses sold in a particular period will influence the mean and so the measure may reflect this change rather than an actual change in price. Recognition of this has lead to a considerable literature on how better to measure changes in house prices. In recent times a number of alternative measures have emerged for the Irish market based on hedonic regression techniques, whereby the price of a commodity is the function of the commodity’s characteristics. This methodology standardises for changes in the mix of properties and so should permit a more accurate record of how house prices have changed

Negative Equity in the Irish Housing Market

Having peaked in early 2007 Irish house prices have fallen steadily. Negative equity occurs if house price falls result in the house value being lower than the outstanding debt. Many in negative equity will be unaffected and will continue to pay their mortgage without difficulty. Negative equity can increase the probability of defaulting if it occurs at the same time as cashflow problems, possibly caused by illness or job loss. This paper estimates that 116,000 borrowers were in negative equity at the end of 2009, rising to 196,000 borrowers by end-2010. Borrowing at, or close to the price peak, high loan-to-value ratios, interest only mortgages and longer mortgage terms have contributed to higher numbers in negative equity. First-time buyers are more likely to be experiencing negative equity. The research shows that many of those who have mortgages are employed in sectors where employment prospects, to date, remain relatively robust. Policies that assist households overcome a loss in income may help lower the default rate.

FDI and the Availability of Dublin Office Space. ESRI Research Notes 2015/3/2

Foreign direct investment (FDI) is an important component of industrial policy in Ireland. Having pursued this policy for many years, Ireland is one of the most FDI-intensive economies in the OECD. The factors underpinning Ireland’s success in attracting FDI have been well documented and include EU membership, native English-speaking, low corporate tax rate, young and skilled labour force and demonstration effects.2 A recent policy statement on FDI identifies the role of cities as becoming increasingly important in FDI flows and cites the attractiveness of Dublin as a key determinant in Ireland’s overall FDI performance (Department of Jobs, Enterprise and Innovation, 2014)

Whither the stock market?

Stock market ; Stocks

Getting a Helping Hand: Parental Transfers and First-Time Homebuyers

A model that allows for inter vivos intergenerational transfers in a booming housing market is developed. The model is used to explain how transfers effect the first-time homebuyer’s consumption and housing decisions by alleviating borrowing constraints. The general implications of the model are tested using data from the leading Irish mortgage provider. We find that private transfers are targeted towards homebuyers that are liquidity constrained.Transfers, Housing, Borrowing Constraint

The Misperception of Inflation by Irish Consumers

Perceptions and forecasts of inflation have the potential to impact on a range of economic outcomes. We reveal large, systematic overestimation of inflation by Irish consumers, which varies by social group. In contrast to previous work in this area, our models suggest the upward bias and the variation by social group should be considered substantially separate phenomena. We also offer evidence that inflation misperceptions are linked to attitudes and intentions with respect to consumption and saving and, hence, are likely to affect household decision-making. The findings therefore raise issues regarding the relationship between financial literacy and consumer behaviour.