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Telegraph UK House Price 55% Crash Forecast Revisited

Housing-Market / UK Housing Nov 04, 2009 - 12:39 AM GMT

By: Nadeem_Walayat

Housing-Market

Best Financial Markets Analysis ArticleBack in March if this year the Telegraph and other mainstream media ran with a scare story that UK house prices could crash by a FURTHER 55%, this was after UK house prices had already fallen by 22% and whilst house prices had yet to bottom the Telegraph story at the time seemed to be a completely ridiculous scare mongering purely for the purpose of sensational headline grabbing rather than presenting something that their readership could utilise to their advantage.


12th March 2009 - Telegraph Runs with Improbable UK House Price Crash Forecast of Another 55%

The mainstream press as illustrated by The Telegraph has run with a house price forecast by Numis Securities (NS) that states that UK house prices could fall by a further whopping 55%, that is a rather incredible forecast to make in light of the of 22% fall to date. NS states that a buy to let investor panic will trigger an avalanche of further selling. I am not aware of Numis Securities past forecasts, however analysis of the perma-bear Capital Economics that has consistently been cropping up with bearish house price forecasts since at least 2002 in the mainstream media illustrated the propensity to reprint press releases with-out checking the facts as to whether the forecast is actually probable or not.

The Telegraph wrote: House prices 'could fall by further 55 per cent

"People who bought buy-to-let flats are expected to “begin panic selling” and the average home value could drop below £100,000."

“Despite UK house prices already having fallen 21% from the peak, we do not believe that the correction is anywhere near over.

“Our core headline forecast is that UK property prices remain between 17% and 39% overvalued based on fair valuation. Moreover, history has shown us that when property…which has experienced a price bubble corrects, the price tends to fall below fair value for a period of time, as confidence in that market remains low. Prices could fall a further 40-55% if the over-correction was as bad as the early 1990s in our view.”

Subsequently, UK house prices bottomed in April / May 2009 and have embarked upon a debt fuelled bounce into the May 2010 General Election, that has already seen UK house prices RISE by more than 7% from the April / May low rather than to CRASH toward another 55% drop.

This is typical lemming like behaviour of the mainstream press in regurgitating press releases rather than taking the time to analyse the relevance of what they are reporting on. Much as the Telegraph and the rest of the press repeatedly ran with the Capital Economics crash forecasts as illustrated by the below graph from - Capital Economics UK Housing Market Forecasts. It is no wonder that the mainstream press is dieing a slow painful death as the internet now presents their readerships with the option of a better source of analysis and information for free.

My most recent update of August 2009 - (UK House Prices Tracking Claimant Count Rather than Unemployment Numbers) concluded -

Summer Bounce 2009 - The unfolding bounce or blip in UK house prices prices is inline with my May analysis that concluded that UK house prices will experience a bounce during the summer months from extremely oversold levels as a consequence of liquid buyers returning to the market and the debt fuelled economic recovery which 'should' be reflected in rising house prices during the summer months that is increasingly being taken by the mainstream press and vested interests to announce that the house prices have bottomed.

My next analysis will seek to compare UK house prices to the GDP growth rate. To ensure that you receive the full final analysis and conclusion / forecast for the UK housing market covering the trend for the few years subscribe to my always free newsletter.

Source : http://www.marketoracle.co.uk/Article14752.html

By Nadeem Walayat
http://www.marketoracle.co.uk

Copyright © 2005-09 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 20 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis specialises on the housing market and interest rates. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 400 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

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