House prices are going to “skyrocket” we are told by a think tank that has never yet got a single prediction right.
Once again the idiots who do research and presumably get paid for churning out total rubbish have given us a prediction about future property prices based on faulty and irrelevant research. Once again these guys have proven they dont know which way is up.
Oxford Economics; that’s what they are called. I quote from the newspaper the Daily Express, which obviously hasn’t done much research itself on the group’s findings.
“In what is hailed as “fantastic” news for the property market, the average value of a home in England is expected to rise from the current £214,647 to £260,304 by 2016.
“It comes after asking prices rose by 1.3 per cent last month, the biggest monthly jump since January 2010. All regions of the country should see an increase.
A shortage of housing, coupled with rising demand will drive the boom, with prices sky- rocketing by more than a fifth in just five years, according to research by Oxford Economics for the National Housing Federation.
“It said that over the past year, only 105,000 new properties have been built across the country – the lowest level since the 1920s. It is also less than half the number needed to meet demand.”
“The National Housing Federation commented on the report saying the housing market will be plunged into an unprecedented crisis and also forecast steep rises in the private rental sector and a house price boom.
“The Federation blamed the bleak outlook on an under-supply of homes in the UK.”
Well, if you believe that you must be crazy. Note the description of “prices sky-rocketing”. To put that in perspective read on.
I dont do forecasts. Only idiots do that. Anyone who claims to be able to predict what house prices will be in 2016 must be as daft as a brush. However, I can tell you that house prices will not show any meaningful rise in the near future, and for the most basic of reasons.
As I never tire of saying, house prices are not governed by the number of people wanting to buy a house, or by how many houses there are, any more than the sales of Ferraris are governed by the number of people who want to drive them. House prices relate to the availability of funding, nothing else. The funding isn’t there. The ability to pay high mortgage prices isn’t there. Banks are locked up. They aren’t getting out of their current mess in a hurry, and when they do, they will be careful who they lend to.
Finally, look back at history. House prices always lag the economy. They are the last thing in the economic cycle to perform. We must see an economic recovery before we see house price rises. That isn’t going to happen any time soon.
House prices cant rise very far because wages are not rising. You cant pay for a more expensive mortgage unless your wage packet goes up. And that is one reason that rents wont rise that much more either. You can only pay what you can afford. In short, without more money sloshing around the system prices wont be rising more than a smidgeon.
Anyone predicting what will happen by 2016 has to be on some interesting drug. My only question is: Can I have some, it seems to be very pretty coloured.
One final point. 21% rise in house prices in five years? Come on, that’s 4% a year (and not compounded). Factor in interest rates on the money borrowed, and inflation, and what would a house need to appreciate by just to keep up with everything else?
Just for the record, the average mortgage interest rate is 5%, and inflation is running at 4.5% and rising. The retail price index stands at 5.3%.
So, never mind the alleluias, if the Oxford Idiots are right, that means house prices wont keep up with inflation. And that’s a definition of “sky-rocketing”? Wow!
Okay, okay, if you insist. I’ll tell what will really happen.
House prices may go up a little, they may go down a little, but dont bank on it. The real story is they probably wont go anywhere much. If you want to buy houses for investment, forget it. Interest rates may stay low but it’s more likely they go up. Can you cope when they do go up?
Have a look at house prices when set against the price of real money (gold). You may be very upset if you do.
There are better places to put your money. Buy a house to live in, not to make money. But also remember, I dont think house prices will fall much from where they are either. The really important fact is: the housing market will remain difficult. In other words: No Change.
Next time the National Housing Federation wants a proper report I suggest they employ someone who knows what he’s talking about. I have been doing this for over forty years and I have yet to get it wrong even once.
Now if we suddenly get a fantastic turn round in the economy, and if the banks suddenly find they aren’t broke after all, and everyone is paying back what they owe, then things might start happening again, but that is rather a long shot I think. I prefer to view today’s economic lunacy as a very long drawn out collapse.