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U.k. House-price Slump Will Persist Until 2012, Niesr Says

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http://www.bloomberg.com/apps/news?pid=206...id=a4RsB_MDg7OY

July 22 (Bloomberg) -- The U.K.’s house-price slump will persist until 2012 and hurt consumer spending, the National Institute of Economic and Social Research said.

Home values will resume their decline because recent gains were driven by a lack of available homes and the number of mortgages remains 65 percent lower than before the financial crisis, the London-based institute said today. It also predicts gross domestic product will keep falling until the final quarter of this year.

“There has been talk of stabilization and some recovery in the housing market, but we don’t think this is the case,†Simon Kirby, an economist at Niesr, told reporters yesterday. “We only see growth in the housing market returning in 2012.â€

The Bank of England said this week that mortgage lending may strengthen in coming months, while Nationwide Building Society says that house prices increased in June. The economy has yet to emerge from recession after contracting the most since 1958 in the first quarter.

“The temporary rise in prices is probably the result of limited supply,†the report said. The institute’s clients include the Treasury and the Bank of England.

Falling house prices will hurt consumer spending growth in the next two years, Niesr said. Together with rising unemployment, this will encourage an increase in the household savings ratio to the highest level since 1997 next year, the institute predicted.

Budget Deficit

Government borrowing will peak at 12 percent of GDP in the fiscal year ending March 2010, or 165.7 billion pounds ($273 billion), before shrinking to 7.5 percent of GDP in 2013-14, Niesr said.

GDP slumped 2.4 percent in the first quarter. Niesr estimates that it fell 0.4 percent in the second quarter. The median forecast of 32 economists in a Bloomberg News survey is for a 0.3 percent drop. The Office for National Statistics will release the data on July 24.

The economy will grow again in the fourth quarter, by 0.5 percent, the institute said.

“The recovery will be weak,†Kirby said. “We see continued contraction in consumer spending and business investment.â€

Bank of England policy makers are spending 125 billion pounds of newly printed money on assets to help bolster the economy. Minutes showing how they voted at the July 9 meeting, when they decided to maintain the size of the current buying program, will be released today at 9:30 a.m. in London.

Alot on here had 2012 pencilled in. I've not read the report but from this report sounds like the fall in supply is forecast to only be temporary. I'm not sure what will cause the rush back to market (they forecast small +ve 4Q GDP but doesn't seem enough to warrant large interest rate rises).

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the bit about a house price slump as predicted by NIESR wasn't reported on the bbc frontpage, although they did cover the predictions of a slow economic recovery.

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the bit about a house price slump as predicted by NIESR wasn't reported on the bbc frontpage, although they did cover the predictions of a slow economic recovery.

that is just typicial of the bbc house news coverage. :rolleyes:

Bloomberg tv has this news on its ticker.

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"Slump?"

There will not be a slump. The certainty is a crash, not a "slump." If Brown thinks the inevitable can be avoided by telling people to take on more debt to get the housing bubble inflating again he is tragically mistaken.

I drove down a particularly nice road along the coast near Brighton yesterday and counted 7 houses for sale--a sudden rush to market. The supply is returning as fear for the future grips the sellers--better take advanatge of the temporary repsite because it will be over before Autum sets in.

Edited by Realistbear

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“The temporary rise in prices is probably the result of limited supply,â€

It saves having to bother to find the real reason I suppose.

Like deliberate market manipulation.

The holding back of pent-up supplies from public auctions.

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http://www.niesr.ac.uk/pubs/searchdetail.p...licationID=2366

• After contracting by 4.3 per cent this year the economy will grow by 1 per cent in 2010.

• Consumer spending will fall by 3.5 per cent in 2009 and by 1.1 per cent next year.

• Unemployment will peak at almost 3m or 9.3 per cent of the labour force in spring 2011.

• House prices will resume their fall, declining in real terms on an annual basis until mid-2012.

• After running at 12 per cent of GDP in both 2009–10 and 2010–11, public sector net borrowing will fall only gradually to 7.5 per cent by 2013–14.

Following the huge 2.4 per cent quarterly decline in the first three months of the year, the biggest for 50 years, the economy will shrink a further 0.4 per cent in the second and stagnate in the third. A recovery will begin in the final quarter of 2009, helped by consumers bringing forward purchases to beat the reversion of VAT from 15 to 17.5 per cent in January. The upswing will be sluggish as GDP expands by 1 per cent in 2010 and 1.8 per cent in 2011. Slack demand will bear down on prices, with consumer-price inflation expected to average 1.3 per cent in 2009 and 2010 while home costs, measured by the GDP deflator, will fall by 0.2 per cent this year and rise by just 0.3 per cent in 2010. The recovery will be weak because consumer spending, housing investment and business capital spending will carry on falling in 2010, though by much less than this year. Private consumption will decline by 1.1 per cent despite rising disposable income as households save more; the saving ratio will rise from 1.7 per cent in 2008 to 6.1 this year and 8.9 in 2010. The further rise in

saving next year occurs partly for precautionary reasons as unemployment continues to rise but it also reflects continued falls in housing wealth as house prices resume their decline. This in turn will also bear down on housing investment, which will fall by 8.5 per cent in 2010. Business investment will decline by 2.5 per cent in 2010. Despite these counterforces, they will be overcome by a turnaround in the inventory cycle and greater support from net trade. A rundown in stocks has intensified the recession, contributing 1.2 percentage points out of the total 4.3 per cent decline in GDP this year. But in 2010 the change in inventories will add 1 per cent to GDP. Net trade, which has already been bolstering the economy during the recession, will underpin the recovery, boosting GDP by 0.9 per cent next year and by 1.2 per cent in 2011. Domestic producers of tradable goods will be able to exploit the competitive advantage from the lower pound as world trade recovers. A feeble recovery will do little to improve the public sector finances. Public sector net borowing will fall only to 10.6 per cent of GDP in 2011–12, when net public debt is expected to reach 83 per cent of national output. Making matters worse in the longer term, trend growth is now estimated to be 2.3–2.4 per cent a year. That makes all the more essential a plan for sterner fiscal retrenchment than the one currently envisaged by the Treasury.

That's a grim forecast. I can't see the note on supply but must be in the main report.

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"Slump?"

There will not be a slump. The certainty is a crash, not a "slump." If Brown thinks the inevitable can be avoided by telling people to take on more debt to get the housing bubble inflating again he is tragically mistaken.

I drove down a particularly nice road along the coast near Brighton yesterday and counted 7 houses for sale--a sudden rush to market. The supply is returning as fear for the future grips the sellers--better take advanatge of the temporary repsite because it will be over before Autum sets in.

confirm i'm seeing more for sale signs now, i'm beginning to suspect some of the solds are actually sale agreeds judging by how long they've been up

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Historically when you hit a major top in real estate, the prices don't recover to the same price (inflation adjusted) for nearly a century. So if you buy a house at a peak it won't come back to its original price for a decade.

Looking at a chart of house prices for 300 years this is the biggest top on record, and typically the declines last at least a decade (recent Japan crash in house prices was 15 yrs decline).

Anyone saying anything different is ignoring 300 years of historic evidence.

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how on earth do they know, prey tell, when it will end? when all their fancy and wrong economic models could only predict unending growth a few years ago and still understate the collapse in GDP?

Here's my prediction:

NIESR, Bank of England and the Treasury will continue to make incorrect economic predictions and shouldn't bother at all. But that would put out of business a lot of macro economists (aka snake oil salesmen)

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how on earth do they know, prey tell, when it will end? when all their fancy and wrong economic models could only predict unending growth a few years ago and still understate the collapse in GDP?

Here's my prediction:

NIESR, Bank of England and the Treasury will continue to make incorrect economic predictions and shouldn't bother at all. But that would put out of business a lot of macro economists (aka snake oil salesmen)

There is a lot of truth in the above. So many people - supposed experts - failed to see the obvious. Many are scrambling around and all over the place. Still, we need more realism to filter down, because the sooner we have the pain, the we can rebuild and start the real recovery.

Maybe there will be another bubble of some sort, I suspect it won't be green - the cracks are beginning to appear there. It won't be too long before the credibility of those pushing the recent boom and green shoots will be gone. People may be dumb, but they are not completely stupid.

There appears to be much dissonance in what is being put out and reality.

I think after the biggest boom ever, no-one really knows how this will pan out or how much the constant interference in markets and sound budgeting will interfere with the necessary correction.

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2012 ?????????????

Why is everybody calling the bottom of the market so soon.........i'm thinking more like 2022 !

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2012 ?????????????

Why is everybody calling the bottom of the market so soon.........i'm thinking more like 2022 !

my feelings too

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I reckon the absolute bottom will be the 21st of December 2012. Exactly. The Mayan's told me so and what's more, we can expect to pass through the galactic gravitaional plane at the same time - watch that sun rise in the conjunction of the milky way and the, er , other thing. The eagle or something.

As a new age of understanding and love will froth over the globe like milk, the Daily Express will have a headline: "At last, house prices are rising".

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2012 ?????????????

Why is everybody calling the bottom of the market so soon.........i'm thinking more like 2022 !

I agree, long, slow and drawn out.

Where I live sellers still holding out for 2007 prices, nothing selling, I am sure it will be the same in 2012.

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+1

Although at least the optimism is starting to point in the right direction, 20XX and not in a couple of months. :blink:

that is the problem if they just got it over with now by slashing property prices by 50% we might just be able to save most of the jobs and companies we have left if this drags on for a few years then this country will be finished all the jobs and companies will be gone and once they have gone we will be very lucky if we see 50% of them return , i for one would rather lose 50% of the value of my properties value and still have a job to pay for it then lose my job and my home because i can't pay for it , this is about more than the value of properties now, the sooner people and the govt realises this the better or the signs will read welcome to third world britain

Edited by puppee

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yes, interesting point.

I too read it from this report, that it is suggesting the shortage in supply is temporary.

So they must have a reason to suggest this? :unsure:

The only reason repossessions haven't gone through the roof is because of our Gordon and saviour ordering that banks don't do it.

The banks have now told Gordon to go feck himself and a repossession tsunami will be hitting these shores in a few months.

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2012 ?????????????

Why is everybody calling the bottom of the market so soon.........i'm thinking more like 2022 !

It should say - house-price crash will presist until 2012, NIESR says.

... then the 'slump' will continue until 2022 ;)

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