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5 "Tells" that the Stock Markets Are About to Reverse

Telegraph Forecasts 10% Drop for UK House Prices 2010, Wrong Again?

Housing-Market / UK Housing Jan 02, 2010 - 04:30 AM GMT

By: Nadeem_Walayat

Housing-Market

Best Financial Markets Analysis ArticleThe Telegraph is forecasting or rather regurgitating Capital Economics House price forecast that prices could fall by 10% in 2010.


Outlook 2010: house prices

Ed Stansfield of Capital Economics

We expect house prices to fall back by about 10pc next year.

The logic is that we are suspicious that this year's price rises are meaningful. The rebound we have seen seems odd given the economic background, while the level of transactions has been very low.

So what happened to March's Telegraph house price forecast that prices would fall by another 55%, which was made just as UK house prices bottomed and have risen by 10% since ?

The Telegraph writes: 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.”

Why has the Telegraph not bothered to check the accuracy of Capital Economic's house price forecasts before virally spreading the copy to their readership. For if they had performed the most basic of journalistic procedures then they would know that Capital Economics bring out house price crash / fall forecasts virtually EVERY YEAR regardless of whether house prices are rising or falling.

After all Capital Economics DID forecast a 20% drop for 2009! Which is similar to what they have done for most years since at least 2002!

BBC December 2002 - Capital Economics warned that the UK property market was severely overvalued, and that prices could fall by up to 30% over the next few years.

BBC October 2003 - House prices are set to fall by 20% in the next 18 months, a leading economics firm predicts. - Capital Economics argues that central banks in both the US and UK have fuelled the housing bubble by keeping interest rates deliberately low, and house prices are now at "dangerously high levels." It predicts that average house prices will fall from £135,000 in 2004 to below £110,000 in 2007, before beginning a more gradual recovery.

BBC September 2004 - Capital Economics is not predicting a sudden drop in prices, but a slow 20% grind lower over the next 2-3 years.

BBC May 2005 - Economic forecast group Capital Economics, which has predicted that house prices could fall, reiterated that the market had reached an "impasse", with buyers and sellers unable to agree on prices. "We expect the pace of the slowdown to pick up as the year progresses, in line with more gloomy reports from surveyors and house builders," Capital Economics said.

Independant Nov 2006 - Capital Economics Giving up on House Price Crash ? - Ed Stansfield, property economist at Capital Economics, said: "I cannot see 2006/2007 being the time we look back on and say 'yes, that was the start of the housing market crash'."

BBC April 2007 - Capital Economics Turns Bullish ? - Capital Economics, which in 2003 famously predicted that the UK was headed for house price falls of up to 20%, broadly agrees with Mr Boulger's upbeat analysis. "It gets to a stage when you can't keep saying a crash will happen while prices keep on rising," Ed Stansfield, analyst at Capital Economics, admits.

Gaurdian November 2007 - Some three months after I forecast the Housing Market Crash of 2007-2008 Capital Economics were forecasting - So, what are the experts saying about 2008? The bleakest assessment (if you are a homeowner, that is) comes from Capital Economics, which says it expects house prices across the country to fall by 3% during both 2008 and 2009. 3% ? Is that all ? After years of forecasting 20 to 30% drops now Capital Economics is down to a abysmally poor forecast of 3% per year for 2008 and 2009, AFTER house prices had already peaked and fallen !

Telegraph- November 2008 - "This housing market correction has already overtaken the 1990s crash and, with the economic slump deepening, it is set to get worse. Interest rate cuts will not be enough to stop the correction, nor slow the pace of house price declines. We expect house prices to fall a further 20pc in 2009," said Seema Shah, property economist at Capital Economics.

And now another 10% drop for 2010 !

This illustrates the reason why the mainstream press continues to march towards a slow but inevitable death, for they cannot compete on price (FREE) nor on quality of analysis / content.

My in-depth UK house price forecast will follow my interest rate forecast for 2009 next week. I started to recognise the bounce in UK house prices in May 2009 that continued following Junes Debt fuelled economic bounce analysis.

To receive my in-depth analysis in your email in-box, ensure you are subscribed to my always free newsletter.

Analysis and forecasts completed to so far for 2010 are :

Source and Add Comments Here: http://www.marketoracle.co.uk/Article16183.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 500 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.

Nadeem Walayat Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Francis
02 Jan 10, 14:19
Capital Economics on House prices in the FT

I read the FT before I read your article, it is amazing how even the venerable FT can print garbage that is clearly based on flawed analysis.

The most bearish forecast has emerged from Capital Economics, the consultancy, which expects house prices to fall by 10 per cent in 2010.

It said the housing market recovery faced considerable obstacles. "Not only is the mortgage credit squeeze still inhibiting demand but unemployment is still rising. So, while we are unsure of the exact timing, renewed house price falls still seem the most likely outcome to us next year."

That view tallies with that of Henry Pryor, a housing expert, who also predicted that prices would fall by about 10 per cent in the face of worsening economic conditions. He added that the election would act as a stumbling block to any recovery given the likelihood the market would freeze during the period.

"I can see prices sliding by more than 10 per cent. The economy is in a shocking state. When it comes to advising clients in 2010 I am in predatory mood."

Thanks again.

Francis


Nadeem_Walayat
02 Jan 10, 15:23
Capital Economics

Yeh Capital economics is turning out to be a great contrary indicator, I will definetly include it as so in my uk house price forecast update.

However 2009 was a tough year for housing market forecasts as in March the Bank of England started to print money to halt house price falls, something it has not done in 300 years !


Jonathan
02 Jan 10, 16:27
house prices

Come off it Nadeem, you yourself forecasted a -16% for 2009.


jonathan davis
03 Jan 10, 04:40
house price forecasts

Yes, but my point is you are castigating CE for incorrect forecasting. CE should not be castigated for their 2009 forecast (previous ones perhaps) due to govt.con intervention. BTW - my own forecast for 2010 is rougly the same (a little more bearish) than CEs.


reality check
28 Feb 10, 03:07
house prices nw wrong prediction in may 2009

this is what the author wrote in may 2009, easy to google:

The UK housing bear market trend is expected to moderate for 2009 from the forecast -16% towards -10%, however the downtrend is expected to continue for many more years at a shallower pace as the housing market depression will have the effect of slowly sapping the will of home owners who continue to mistakenly hold on to hope of a return of the housing boom to sell into that will FAIL to materialise as the house prices eventually drift towards the forecast for a peak to trough contraction of approx 38%. Please feel free to add your comments to this analysis here.


Nadeem_Walayat
28 Feb 10, 06:55
UK house prices bounce

The START of the bounce in UK house prices was recognised in May 2010 as you illustrated i.e. moderation in the pace of decline

May 18th 2009 - http://www.marketoracle.co.uk/Article10739.html

The unfolding bounce in UK house prices prices is inline with my recent 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 which 'should' be reflected in rising house prices during the summer months that undoubtedly will increasingly be taken by the mainstream press to conclude that the house prices have bottomed.

My actual foreast of Dec 2008 was for a 16% decline which was ontrack until the government in march 2009 decided to bring house prices falls to a halt as a consquence of The Labour Government bankrupting britian by buring hundreds of billions, somethign that would only become visible in the official data much later as borrowing and deficit data was released by the government.

I warned of right at the birth of the housing bear market in August 2007 that the government had it in its power to bring house price falls to a halt by printing and throwing money at the market whcih they have - However any bounce generated is temporarily as it is ARTIFICIAL, despite continuing into the general election.

The government panicked, and abandoned everything in favour of preventing house prices from falling

Why ?

Because falling house prices generated more bad debts for the banks that they had bailed out so they had to stop house prices from falling. Again the government and bank of england were in panic mode.

A long list of analysis from MAY 2009 recognised this fact i.e.

31 May 2009 - Labour Governments Bankrupt Scorched Earth UK Economy for the Conservative Government

http://www.marketoracle.co.uk/Article10990.html

Uk house prices are being pumped up by the government for the purposes of the general election.

This support is costing hundreds of billions. As the banking system is arficial where bankrupt banks are not being allowed to go bankrupt, so is the housing market from March 2009 artificial in that house prices are NOT being allowed to fall at a huge cost.

Under the current climate the best one can do is to recognise a bounce is underway and estimate as to when the artificial support will be pulled and that concludes towards the May 2010 General election. Which is also the date by which I will publish an indepth multi-year forecast that takes into account that the countries coffers will be empty and therefore the government will not be able to artificially life prices higher and therefore we 'should' have a 'market' in housing.


mr c
25 May 10, 05:05
house prices

I predicted and saw the 87 housing bust , I see the 2010 bust, E.O.Year London House prices will be 25% less than the peak of 2007, 2011 is the 1990's ALL OVER AGAIN!!! WHICH EQUATES TO A 40% DROP IN LONDON PROP PRICES from the peak of 2007.

HOW DO I KNOW?? INSTINCT... I'VE NEAVER BEEN WRONG * I HAVE THE ABILITY TO PREDICT THE FUTURE* I was an estate agent in London for 25 years.


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