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

UK House Prices Post Election Fall, Whilst Annual Momentum Plays Catchup

Housing-Market / UK Housing Jun 04, 2015 - 11:02 AM GMT

By: Nadeem_Walayat

Housing-Market

The latest UK house prices seasonally adjusted data published by the Halifax registered a fall of 0.1% for May 2015 that followed a 1.6% surge for April as George Osborne succeeded in his pre-election house prices boom timed to reach maximum intensity just prior to election day. Following which house prices are starting to show signs of rolling over in the monthly data whilst the annual data continues to play catch up as annual inflation nudged higher to 8.6%. Which also makes a mockery of recent mainstream press deflation scare stories in the wake of annual CPI dropping to -0.1%, which at the time I warned was ignoring the elephant in the room, namely house price inflation galloping ahead at 10% per annum.


House Prices Momentum

The Non seasonally adjusted UK house prices momentum graph more clearly illustrates the point that the UK house prices boom was engineered to peak just prior to election day at +10.3%, which barely a month later has already taken a dive to +7%.

The slump in momentum is in line with my expectations for house prices momentum to fall in the months following the general election, that I expect to continue falling for a couple more months. However, don't take this post election slowdown as a harbinger of anything other than a mild correction as I expect the over-riding bull market trend to reassert as the fundamental drivers continue to strengthen

Fundamental drivers such as out of control immigration with the most recent net migration figures soaring by 50% to 318k which makes a mockery of every promise and pledge that the Conservative led Coalition made for the past 5 years of not just controlling immigration which is in addition to the 250,000 natural growth (births-deaths) that remains one of the key primary mega-trend drivers for house prices.

The following graph further illustrates the effect of out of control immigration on UK house prices as the ratio between the accumulative change in population since 1970 against the accumulative number of new housing builds also since 1970 as an over crowding ratio illustrates the worsening trend in the level of over crowding due to inability of new supply to meet new demand that just keeps accumulating each year which acts to propel house prices ever higher regardless of the stream of academic theories as to why house prices cannot rise because they have become increasingly un-affordable, far out pacing average wages.

Other key drivers are of course record low interest rates, yes even ordinary retail mortgage customers are temporarily reaping the rewards of an artificial banking system that is screwing savers and workers by inflating the money supply through printed money, as illustrated by the surge in mortgage approvals as there appears to be a mad dash to fix before market rates rise as the banking system encourages all to saddle up with debt financed by money conjured out of thin air (fractional reserve banking) so that everyone and everything is turned into a debt slave wholly focused on meeting those monthly interest payments rather then to rage against the machine.

UK House Prices 5 Year Forecast

It is now 15 months since excerpted analysis and the concluding 5 year trend forecast from the then forthcoming UK Housing Market ebook was published as excerpted below-

UK House Prices Forecast 2014 to 2018 - Conclusion

This forecast is based on the non seasonally adjusted Halifax House prices index that I have been tracking for over 25 years. The current house prices index for November 2013 is 174,671, with the starting point for the house prices forecast being my interim forecast as of July 2013 and its existing trend forecast into Mid 2014 of 187,000. Therefore this house prices forecast seeks to extend the existing forecast from Mid 2014 into the end of 2018 i.e. for 5 full years forward.

My concluding UK house prices forecast is for the Halifax NSA house prices index to target a trend to an average price of £270,600 by the end of 2018 which represents a 55% price rise on the most recent Halifax house prices data £174,671, that will make the the great bear market of 2008-2009 appear as a mere blip on the charts as the following forecast trend trajectory chart illustrates:

In terms of the current state of the UK housing bull market, the Halifax average house prices (NSA) data for May 2015 of £198,684 is currently showing a 3% deviation against the forecast trend trajectory, which if it continued to persist then in terms of the long-term trend forecast for a 55% rise in average UK house prices by the end of 2018 would translate into an 10% reduction in the forecast outcome to approx a 45% rise by the end of 2018.

The next big milestone will be when average house prices set a new record high, which despite the post election slowdown should be imminent, and we will probably see such headlines on release of July data which also illustrates the point that George Osborne just missed achieving such headlines just prior to election day.

UK House Prices into the 2020's

Looking beyond my existing five year forecast covering the period 2014-2018, that after 7 years of relative economic pain (2008-2014) as illustrated by the cost of living crisis, Britain this year has entered a 7 year economic boom (above trend growth) that can only continue to drive the UK house prices bull market to well into the 2020's, for which I at least expect an average price increase of 10% per annum, that's a minimum 70% further rise in average house prices! Details on this to come over many more years so ensure you are subscribed to my always free newsletter to get in-depth analysis and detailed trend forecasts in your email in box.

UK House Prices Forecast Conservative Election Win

Whilst the opinion pollsters, academics, pseudo-analysts (journalists) and book makers ALL got the 2015 UK general election result badly wrong right upto the close of the polls, who collectively forecast that the only workable outcome would be one of a minority Labour government supported by the SNP. Instead the actual result surprised all by delivering an outright majority Conservative government that not even the BBC exit poll forecast and which only became apparent after about 600 of the 650 results were declared.

However, for what actually did prove virtually spot on in forecasting the outcome of the UK general election 2015, I turn to my analysis of UK house prices that since December 2013 consistently forecast a Conservative outright election victory as illustrated by the following video summary -

Furthermore, since I have a good idea of how house prices will perform over the next 5 years I can tell you with some confidence that the Conservatives are also likely to win the 2020 general election! Though, in the interests of accuracy do come back to my detailed analysis to conclude in seats per party forecasts that I will probably publish a year or so before the next general election.

Source and Comments: http://www.marketoracle.co.uk/Article50951.html

By Nadeem Walayat

http://www.marketoracle.co.uk

Copyright © 2005-2015 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 25 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 focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.

Housing Markets Forecast 2014-2018The Stocks Stealth Bull Market 2013 and Beyond EbookThe Stocks Stealth Bull Market Update 2011 EbookThe Interest Rate Mega-Trend EbookThe Inflation Mega-trend Ebook

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 1000 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

patrick
17 Jun 15, 14:04
NZ Currency

Hi Nadeem - this is a little off topic from your article ( which I'm interested in as I'm moving back to the UK from NZ and will be entering the housing market again) but I've been a regular reader of yours for a while and you seem to get it right so I thought you may have a view on this question - Do you have any thought on the current plummeting of the NZ dollar - its dropped over 15% over the last month just before I've been able to sell by house and transfer the money back to GBP. - I'd love to think it will spring back a but but fear it will continue against me for longer than my nerves can hold ! Any thoughts appreciated

Cheers


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