Last issue

Included this week:

  • HICP
  • Gas consumption
  • Pension converage
  • Houshold Arrears
  • Housing in Europe

HICP

As discussed in week one, Data for Germany for January 2023 was not available in time for publication of the Flash estimate, the euro area HICP was been calculated using Eurostat estimates for Germany. The Flash estimate had HICP at 8.5% and 5.2% Core for January.

Slight adjustment to the estimate with both series being 10 bps higher than the estimate.

Slight adjustment to the estimate with both series being 10 bps higher than the estimate.

Markets have been speculating on the peak / “terminal” rate for the ECB, what the rate will be and when it will get there. I am sticking with base case of 3.75% heading into the September meeting, made in Jan week 1. - I’d now put this at 75% to 80% chance.


Gas consumption

Imports

Unsurprisingly the largest decline (on a 12 month moving average) has come in the last year. The pandemic also resulted in a reduction in imports.

Unsurprisingly the largest decline (on a 12 month moving average) has come in the last year. The pandemic also resulted in a reduction in imports.

Stock levels

There has been an EU wide effort to increase stocks of gas close to capacity since the invasion. This has been helped by a mild winter.

There has been an EU wide effort to increase stocks of gas close to capacity since the invasion. This has been helped by a mild winter.

Consumption


Pension

Coverage

Although increasing generally, one quarter of people ages 55-69 do not have pension coverage.

Although increasing generally, one quarter of people ages 55-69 do not have pension coverage.

Type of Pension

Occupation


Industry


Household Arrears


Housing in Europe


Foreword: Ireland differs from its European peers in the type of dwellings that make up the housing stock, with a disproportionate number of housing units in urban areas. - Leading to high degrees of under occupation. This will be unsurprising for anyone following the Irish housing market. Leo Varadkar was reportedly alarmed at Ireland “low home-ownership rate”. There is nothing overtly alarming about about a rate which has stabilised around 70% since 2010, approx 5% above the Euro Area average.

Housing investment is yet to recover from the Global Financial Crisis in Italy, Spain and in particular Ireland. Whether these levels were tenable or desirable is a different matter. The dwelling investment index is up 60% from 2010 in chain linked volumes


Conditions

Urbanisation

Dwellings


Ireland has seen a rapid increase in the share of the population that lives in flats. Showing a 3.5 times increase from 2005 to 2021. This increase was skewing the comparable countries and as a result I've take Ireland out of the right panel of the graph ro rescale the other European countries.

Ireland has seen a rapid increase in the share of the population that lives in flats. Showing a 3.5 times increase from 2005 to 2021. This increase was skewing the comparable countries and as a result I’ve take Ireland out of the right panel of the graph ro rescale the other European countries.


While the rate of change in the share housed in flats is informative, the levels show how Ireland really compares to its neighbours in terms of housing.

Consider Spain versus France, Spain has 70% of the population living in flats whereas France has 70% living in houses. The Euro Area average is approximately 50-50, Ireland is at vastly different levels to it's neighbours.

Consider Spain versus France, Spain has 70% of the population living in flats whereas France has 70% living in houses. The Euro Area average is approximately 50-50, Ireland is at vastly different levels to it’s neighbours.

Degrees of Urbanisation as defined by Eurostat, follow link for map of Europe.

  • DEG1: Cities, densely populated areas where at least 50% of the population lives in urban centers.
  • DEG2: Towns and suburbs, intermediate density areas where less than 50% lives in rural grid cells and less than 50% of the population lives in urban centers.
  • DEG3: Rural areas, thinly populated areas where more than 50% of the population lives in rural grid cells.


Dwelling Types as defined by Eurostat

  • FLAT_GE10: Flat in a building with more than ten dwellings.
  • FLAT_LT10: Flat in a building with less than ten dwellings.
  • HOUSE_D: Detached house
  • HOUSE_SD: Semi-detached house
The largest share by dwelling type for cities in Ireland is Semi-detached houses, where as in Spain it is flats in complexes of more than 10 units.

The largest share by dwelling type for cities in Ireland is Semi-detached houses, where as in Spain it is flats in complexes of more than 10 units.


Flipping the previous charts facet grouping from dwelling type to building (and vice versa) lets us look into more detail the regional variation. While Ireland has a large rural population and therefore you can expect a high number of detached houses in DEG3 the high proportion of semi-detached in DEG2 and particularly DEG1 is the underlying difference between Ireland and its neighbours. There just aren't many apartments, a function of planning restrictions on height being the obvious factor.

Flipping the previous charts facet grouping from dwelling type to building (and vice versa) lets us look into more detail the regional variation. While Ireland has a large rural population and therefore you can expect a high number of detached houses in DEG3 the high proportion of semi-detached in DEG2 and particularly DEG1 is the underlying difference between Ireland and its neighbours. There just aren’t many apartments, a function of planning restrictions on height being the obvious factor.


Overcrowding

The overcrowding rate is defined as the percentage of the population living in an overcrowded household.

A person is considered as living in an overcrowded household if the household does not have at its disposal a minimum number of rooms equal to:

  • one room for the household;
  • one room per couple in the household;
  • one room for each single person aged 18 or more;
  • one room per pair of single people of the same gender between 12 and 17 years of age;
  • one room for each single person between 12 and 17 years of age and not included in the previous category;
  • one room per pair of children under 12 years of age.
With the high volume of housing units compared to apartments the comparatively low overcrowding rate s in Ireland are not a surprise.

With the high volume of housing units compared to apartments the comparatively low overcrowding rate s in Ireland are not a surprise.

Under Occupied

An under-occupied dwelling is a dwelling deemed to be too large for the needs of the household living in it, in terms of excess rooms and more specifically bedrooms.

If the household living in it has at its disposal more than the minimum number of rooms considered adequate, and equal to:

  • one room for the household
  • one room per couple in the household
  • one room for each single person aged 18 or more
  • one room per pair of single people of the same gender between 12 and 17 years of age
  • one room for each single person between 12 and 17 years of age and not included in the previous category
  • one room per pair of children under 12 years of age
The reverse of over-crowding.

The reverse of over-crowding.


Cost Overburden

The housing cost overburden rate is the percentage of the population living in households where the total housing costs (‘net’ of housing allowances) represent more than 40 % of disposable income (‘net’ of housing allowances).

The housing crisis is not obvious from the overburden rate, partly a function of low rates.

The housing crisis is not obvious from the overburden rate, partly a function of low rates.


Tenure

Cost Overburden

As we would expect it is a different situation for renters.

As we would expect it is a different situation for renters.

  • OWN_L: Owner with a mortgage or loan.
  • OWN_NL: Owner with no outstanding mortgage or loan.
  • RENT_MKT: Tenant renting at market price.
  • RENT_FR: Tenant renting at reduced price or free.

According to Sipkova (2020) ‘social rental housing in most countries is included under subsidised rent, but in some cases, it is classified as private rent’.

Population

Ireland has the largest share of reduced market renters in the sub 60% median income cohort.

Ireland has the largest share of reduced market renters in the sub 60% median income cohort.


Owner vs Tenant

The left panel shows the share of population which are owner occupiers, with Ireland above the Euro Area average. The right panel shows this data indexed to 2010. - Initially showing the largest decline in the sample above, Ireland stabilised approx 5% lower than 2010 levels.

The left panel shows the share of population which are owner occupiers, with Ireland above the Euro Area average. The right panel shows this data indexed to 2010. - Initially showing the largest decline in the sample above, Ireland stabilised approx 5% lower than 2010 levels.


Income

I define income premium as the difference in median earnings between owners and renters expressed as a percentage of the median rent income. The premium for the typical working age population in Ireland is double that of the Euro Area.

I define income premium as the difference in median earnings between owners and renters expressed as a percentage of the median rent income. The premium for the typical working age population in Ireland is double that of the Euro Area.


Financials

Eurostat

I’ve taken two indices to analyse construction cost and investment in housing. - The maps are the selection of countries for each dataset that I’ve chosen based on manually removing outliers/values which skew the scale.

Construction Costs

Ireland has followed the trend of significant increases in output price post 2020.

Ireland has followed the trend of significant increases in output price post 2020.


Output Price Index in Construction - Eurostat
s_adj unit geo time values year_qtr
NSA I15 AL 2022-07-01 111.4 2022 Q3
NSA I15 AT 2022-10-01 149.2 2022 Q4
NSA I15 BA 2022-07-01 131.8 2022 Q3
NSA I15 BE 2022-07-01 134.8 2022 Q3
NSA I15 BG 2022-10-01 226.3 2022 Q4
NSA I15 CH 2022-10-01 115.8 2022 Q4
NSA I15 CY 2022-07-01 123.9 2022 Q3
NSA I15 CZ 2022-07-01 140.3 2022 Q3
NSA I15 DE 2022-10-01 154.7 2022 Q4
NSA I15 DK 2022-07-01 123.2 2022 Q3
NSA I15 EA19 2022-10-01 135.5 2022 Q4
NSA I15 EA20 2022-10-01 135.5 2022 Q4
NSA I15 EE 2022-07-01 138.6 2022 Q3
NSA I15 EL 2022-10-01 109.5 2022 Q4
NSA I15 ES 2022-10-01 126.7 2022 Q4
NSA I15 EU27_2020 2022-10-01 136.4 2022 Q4
NSA I15 FI 2022-10-01 120.4 2022 Q4
NSA I15 FR 2022-07-01 125.7 2022 Q3
NSA I15 HR 2022-07-01 157.0 2022 Q3
NSA I15 HU 2022-10-01 214.7 2022 Q4
NSA I15 IE 2022-10-01 131.4 2022 Q4
NSA I15 IT 2022-10-01 116.3 2022 Q4
NSA I15 LT 2022-10-01 154.1 2022 Q4
NSA I15 LU 2022-10-01 142.1 2022 Q4
NSA I15 LV 2022-07-01 153.9 2022 Q3
NSA I15 ME 2022-07-01 148.3 2022 Q3
NSA I15 MK 2022-07-01 160.0 2022 Q3
NSA I15 MT 2022-07-01 146.5 2022 Q3
NSA I15 NL 2022-07-01 147.6 2022 Q3
NSA I15 NO 2022-10-01 138.3 2022 Q4
NSA I15 PL 2022-07-01 134.6 2022 Q3
NSA I15 PT 2022-10-01 133.6 2022 Q4
NSA I15 SE 2022-10-01 137.5 2022 Q4
NSA I15 SI 2022-07-01 142.5 2022 Q3
NSA I15 SK 2022-10-01 157.1 2022 Q4
NSA I15 TR 2022-07-01 652.1 2022 Q3
NSA I15 UK 2020-07-01 115.4 2020 Q3


Housing Investment

While housing investment has approximately doubled since 2015, it would have to double again to reach pre GFC levels. Neither Spain or Italy have reached pre GFC levels.

While housing investment has approximately doubled since 2015, it would have to double again to reach pre GFC levels. Neither Spain or Italy have reached pre GFC levels.

While 2015 as a base period was informative for construction costs the proliferation of investment in dwellings before the GFC and subsequent sharp decline makes 2015 a poor reference period for Ireland. To compare with the largest economies in Europe 2010 is a better base period. The second panel is indexed to 2010 and the date is set to 2012

While 2015 as a base period was informative for construction costs the proliferation of investment in dwellings before the GFC and subsequent sharp decline makes 2015 a poor reference period for Ireland. To compare with the largest economies in Europe 2010 is a better base period. The second panel is indexed to 2010 and the date is set to 2012

Eurostat used investment as a percentage of GDP as the comparisn in their recent publication on 'Housing in Europe'. Ireland has the second lowest at 2.1% with this metric, given the anomalies with GDP I've chosen the above instead. Here we are approaching the upper end of the countries in the sample.

Eurostat used investment as a percentage of GDP as the comparisn in their recent publication on ‘Housing in Europe’. Ireland has the second lowest at 2.1% with this metric, given the anomalies with GDP I’ve chosen the above instead. Here we are approaching the upper end of the countries in the sample.

Gross fixed capital formation: Investment in Housing - Eurostat (nama_10_an6)
unit asset10 s_adj geo time values year_qtr
CLV_I10 N111G SCA AT 2022-07-01 117.071 2022 Q3
CLV_I10 N111G SCA BG 2022-07-01 124.340 2022 Q3
CLV_I10 N111G SCA CY 2022-07-01 107.583 2022 Q3
CLV_I10 N111G SCA CZ 2022-07-01 132.803 2022 Q3
CLV_I10 N111G SCA DE 2022-07-01 129.609 2022 Q3
CLV_I10 N111G SCA DK 2022-07-01 188.649 2022 Q3
CLV_I10 N111G SCA EA 2022-07-01 113.109 2022 Q3
CLV_I10 N111G SCA EA12 2022-07-01 112.542 2022 Q3
CLV_I10 N111G SCA EA19 2022-07-01 113.109 2022 Q3
CLV_I10 N111G SCA EE 2022-07-01 328.016 2022 Q3
CLV_I10 N111G SCA EL 2022-07-01 27.315 2022 Q3
CLV_I10 N111G SCA ES 2022-10-01 103.037 2022 Q4
CLV_I10 N111G SCA EU15 2019-10-01 112.717 2019 Q4
CLV_I10 N111G SCA EU27_2020 2022-07-01 117.289 2022 Q3
CLV_I10 N111G SCA EU28 2019-10-01 113.715 2019 Q4
CLV_I10 N111G SCA FI 2022-07-01 125.794 2022 Q3
CLV_I10 N111G SCA FR 2022-10-01 111.692 2022 Q4
CLV_I10 N111G SCA HR 2022-07-01 95.852 2022 Q3
CLV_I10 N111G SCA HU 2022-07-01 179.888 2022 Q3
CLV_I10 N111G SCA IE 2022-07-01 160.156 2022 Q3
CLV_I10 N111G SCA IT 2022-07-01 94.113 2022 Q3
CLV_I10 N111G SCA LT 2022-07-01 239.966 2022 Q3
CLV_I10 N111G SCA LU 2022-07-01 143.686 2022 Q3
CLV_I10 N111G SCA LV 2022-07-01 115.793 2022 Q3
CLV_I10 N111G SCA MT 2022-07-01 211.056 2022 Q3
CLV_I10 N111G SCA NL 2022-10-01 149.995 2022 Q4
CLV_I10 N111G SCA NO 2022-07-01 140.830 2022 Q3
CLV_I10 N111G SCA PL 2022-07-01 156.466 2022 Q3
CLV_I10 N111G SCA PT 2022-07-01 90.977 2022 Q3
CLV_I10 N111G SCA RO 2022-07-01 135.509 2022 Q3
CLV_I10 N111G SCA RS 2022-07-01 106.657 2022 Q3
CLV_I10 N111G SCA SE 2022-07-01 163.038 2022 Q3
CLV_I10 N111G SCA SI 2022-10-01 92.334 2022 Q4
CLV_I10 N111G SCA SK 2022-07-01 183.013 2022 Q3
CLV_I10 N111G SCA UK 2020-07-01 140.766 2020 Q3


BIS

I’ve pulled in the BIS house price indicies and matched to the output cost and housing investment data for each period where both were observed. A simple scatterplot and correlation for each variable with the appropriate price is included below.

Price & Costs

See above scatterplot with yearly construction cost variation on the x-axis and house price variation on the y-axis. The r value indicates a moderate positive correlation between the two variables, with a higher values of costs being associated with higher values of price. - As we would expect.

See above scatterplot with yearly construction cost variation on the x-axis and house price variation on the y-axis. The r value indicates a moderate positive correlation between the two variables, with a higher values of costs being associated with higher values of price. - As we would expect.


Price & Investment

While it may be surprising to see a low positive correlation between the increase in housing investment and the increase in house prices there are complexities which a simple correlation ignores. - Levels aside, there are lagged effects and regional variations to consider.

While it may be surprising to see a low positive correlation between the increase in housing investment and the increase in house prices there are complexities which a simple correlation ignores. - Levels aside, there are lagged effects and regional variations to consider.


All scales adjusted for each country, notable variation in time, region and scale.

All scales adjusted for each country, notable variation in time, region and scale.