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Nationwide UK House Price Forecasts Track Record

Housing-Market / UK Housing Nov 27, 2008 - 12:59 PM GMT

By: Nadeem_Walayat

Housing-Market Best Financial Markets Analysis ArticleThe latest housing market commentary from the Nationwide Chief Economist Fionnuala Earley states - "In spite of the moderation in house price falls recorded in November, with the economy in recession, conditions do not appear very favourable for a swift recovery in the housing market. The labour market is weakening, which will inevitably hinder market demand, particularly when property remains expensive relative to earnings. With prices falling at their current rate there is also little incentive for new borrowers to hurry into the market. However, there are a number of measures which should provide some support to the market in general and help existing and potential homeowners in these difficult times."


Whilst 12 months ago the Nationwide was forecasting basically flat house prices for 2008, therefore this article looks back at the Nationwide's housing market analysis during the initial 9 months of the housing bear market, when potential home sellers could have acted ahead of the housing market crash of 2008.

July 2007 - 'We are confident that our original forecast published in December 2006 is still on track and we expect the rate of house price growth to fall from 11 pct now to around the middle of the 5-8 pct range,' said Nationwide's chief economist, Fionnuala Earley.

Sept 2007 -“House prices recorded a reasonably strong gain of 0.7% between August and September, seemingly shrugging off the unsettled events of the past month. Despite this increase, the 12-month rate of house price inflation came down from 9.6% in August to 9.0%, as we are now entering a period during which house prices gains were particularly strong in 2006. This brought the average price of a typical UK property to Ł184,723. The 3-month on 3-month rate of price growth – often the smoothest indicator of underlying momentum – slowed from 2.0% to 1.6%, the lowest level since July 2006. Overall, house prices defied the gloomy predictions of some recent headlines, but their underlying growth is still on a decelerating trend."

Oct 2007 - "investors with long horizons can still make satisfactory returns if long-term historical trends for house prices and rents hold up. The government's latest projections show that the 15-34 year old population will be increasing until the middle of the next decade, and this should be supportive of both tenant demand and rents. Even with only modest house price inflation, these conditions would produce relatively healthy returns over a 10-15 year horizon.

Nov 2007 - Citywire - House prices are expected to stall at their current level of £186,044 for at least the next year, the Nationwide housing forecast for 2008 has predicted.

Dec 2007 - It is true that lower interest rates will probably help market activity recover somewhat later in 2008, as lower house price growth restores some affordability and allows pent-up demand from first-time buyers to be released. However, it seems unlikely that there will be a big recovery in activity and prices mirroring the 2005 experience. This is mainly because housing affordability is starting from a much worse position than in 2005, while interest rate cuts have started from a higher and more restrictive level. Therefore, this time around lower interest rates are more likely to stabilise market activity rather than reignite it.

Jan 2008 - This undoubtedly signals a continued cooling in annual house price inflation during the months ahead. That being said, there may be some tentative signs of bottoming out on the demand side, as evidenced by the recent behaviour of the Royal Institution of Chartered Surveyor's measure of new buyer enquiries at estate agents. This measure is a good leading indicator of mortgage approvals and had been falling steadily since the second half of 2006 in an environment of rising interest rates and worsening affordability. The drop in demand was particularly acute among first-time buyers, who found it increasingly difficult to raise the deposits needed to climb onto the housing ladder. After reaching a low point in September of last year, the buyer enquiries measure saw a modest recovery between October and December. This is not altogether surprising, as some potential buyers who had been priced out of the market may have recently had their interest spurred by expectations of lower interest rates in 2008 and the possibility of their bargaining position improving in looser market conditions.

March 2008 - “The outlook for UK house prices is clearly more downbeat than at the time of our November forecast. Some of the downside risks we identified then have become a reality – most notably the continued turmoil in the financial markets. However, the path for house prices in 2008 still looks set to remain within our forecast range. We expect a modest fall in house prices during the year, but such a fall should be seen in context. If prices were to fall in line with consumers' expectations, they would still be higher than two years ago. A moderate fall in prices at this stage should not be unwelcome and should help to ensure greater stability in the market going forward.”

Conclusion - The housing market forecasts produced by the Nationwide's chief economist tends to be more commentary on the current state then actual forward looking forecasts i.e. lack specifics of where the market will go and tend to include many caveats. However whenever what could be termed as a forecast has been made, they tend to be overly optimistic against what has subsequently transpired.

To see how Capital Economics the UK's housing market perma-bears have performed see - Capital Economics UK Housing Market Forecasts

Market Oracle Forecast August 2007 - UK Housing Market Crash of 2007 - 2008 and Steps to Protect Your Wealth

UK Housing Market Conclusion: The UK Housing market is expected to decline by at least 15% during the next 2 years. Despite the 2012 Olympics, London is expected to fall as much as 25%. UK Interest rates are either at or very near a peak, as there is an increasingly diminishing chance of a further rise in October 2007. After which UK interest rates should be cut as the UK housing market declines targeting a rate of 5% during the second half of 2008. The implications for this are that the UK economy is heading for sharply lower growth for 2008.

The UK housing market forecast is due for an imminent update after the 15% target having been fulfilled this month. Subscribe to our always free newsletter to get the scheduled analysis in your inbox on the day of publication.

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

Copyright © 2005-08 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 150 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.

Attention Editors and Publishers! - You have permission to republish THIS article. Republished articles must include attribution to the author and links back to the http://www.marketoracle.co.uk . Please send an email to republish@marketoracle.co.uk, to include a link to the published article.

Nadeem Walayat Archive

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


Comments

jonathan davis
29 Nov 08, 16:02
capital economics / nationwide article

NAdeem

Whatever you do make sure you don't mention that I said 25% fall in April 2007, 35% in October and 45% in September 08 for HPC.co.uk

Make sure you don't

And of course make sure you never publish my emails 'cos you know how embarrassing they are for you


Nadeem_Walayat
30 Nov 08, 04:44
capital economics / nationwide article

Sure, point me towards your analysis and forecasts and I will analyse them for you if you want me to.

BUT, take NOTE ! forecasts without adequate analysis are worthless!

I recieve hundreds of forecasts a month, hundreds just saying xyz will fall or rise by 20% , 30%, 40% etc.. with NO SUPPORTING analysis - NONE !

Totally worthless.

Therefore forecasts - MUST BE BACKED UP BY ANALYSIS, in fact good, solid comprehensive analysis is far more important than the forecast for it is that which gives a forecast credibility in knowing that it amounts to more than plucking a figure out of thin air.

I.e. one arrives at the forecast conclusion AFTER the analysis has been completed not before, therefore emailing me that house prices will fall by x,y,z is of no use whatsoever, maybe for the mainstream press ?

I've checked my email and I am in receipt of 3 emails Jonathon.

1. June 13

Jonathan Davis to Nadeem
show details Jun 13 Reply

Nadeem

I posted on your site, in response to your 6 June article. How come you
didn't put it up?

Criticism / jolly debate not allowed?

Jonathan Davis

I do not have a clue to what the above referred, comments can be lost for two reasons.

1. That they were not actually posted properly in the first place.

2. That they were deemed to be spam at the time, for the site receives 100 spam comments for every genuine comment.

The best thing is to include the comment in any email so that if it was missed it will be posted for you.

 

EMAIL 2 - Was a press release about appearing on ITV1 i.e.

You may wish to know that I shall be exploring the economy, with particular regard to the housing market, on ITV1 at 8pm on Monday evening (22 nd September) on Tonight with Sir Trevor MacDonald. 

 

To which I replied wishing you the best for the program, which if I recall was a good showing.

 

And the third and last email on 13th october titled - FW: Where are we after they have nationalis ed the West's banking system? Wow!

Subject: Where are we after they have nationalised the West's banking system? Wow!

Dear Client of Armstrong Davis

From time to time, we send out emails discussing our current thinking.

A quick review, first.

We wrote, on 24th January 2008:

Which actually WAS posted to the site - http://www.marketoracle.co.uk/Article6759.html

EMBARRASING ????? I do not understand why I would be embarrassed by your emails as copied above ? The only times when I feel a touch of embarrassment is on the thankfully few occasions when my own analysis turns out to be wrong.

The site receives over 700 submissions a month of which approx 450 get posted and unfortunately I can barely recall much of what I wrote many months ago let alone be aware of what others have written.

Anyway, all the best for 2009.

 

Nadeem Walayat.


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