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Office Of Budgetary Responsibility Says:

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I've looked for a thread on this but can't see one:

http://dofonline.co....-prices-234324/

The most radical aspect of the new Office of Budgetary Responsibility is not that an 'independent' agency is now producing forecasts but that the government body is risking predicting house prices. And it confidently says house prices will keep rising.

As the value of homes is key to the UK economy - the collateral that stops banks going bust and the highly-geared asset that provides consumers with confidence - the positive picture from Sir Alan Ball's new agency is important.

This is the one key indicator from the OBR with which the general population can relate. Telling us what economic growth will be for the next five years is interesting, but how it affects us depends on which sector of the economy we inhabit: the public sector has enjoyed a totally different growth to the building sector in recent years, for instance. Unemployment projections are equally fickle: we will either have jobs or not - with no knowledge of whether there are 1m people in the same boat or 3m. Telling us the national debt or the annual deficit simply baffles us with meaningless billions.

Even retail goods inflation is a factor beyond our control that affects different people differently. But house prices affect all homeowners and would-be owners and the difference in value changes between studio flats and mansions or even between north and south is small compared with the underlying general rise or fall.

The OBR reckons house prices will rise by 5.9 per cent this year, 1.6 per cent next year, 3.9 per cent in 2012 then 4.5 per cent in each of the two following years. Assuming the same rate for the final two years may suggest the forecasters have no view on whether the rate will be rising or falling by then, but they are certain there will be no double dip. Indeed, not only will there be no fall, there will no decline in real terms in any year – not even in 2011, because general inflation is forecast to dip to 1.6 per cent then too.

If the OBR is right, prices will be 22 per cent higher in 2014 than they are today – which would be a 33 per cent increase from spring 2009 and take values back above their 2007 pre-crunch peak.

So with negative-equity evaporating and unemployment forecast to fall from 1.5m to 1.1m, there is a base upon which to build the growth that can be taxed to repay the country's debt and close the deficit.

Or at least there is if the OBR predictions prove correct. A lot of people who should know what they are talking about have regularly got their forecasts of house prices badly wrong. Not just estate agents who have a vested interest in talking their books, but banks such as Halifax and Nationwide that not only need to be sure their mortgages will be repaid but which are also the best collectors of data on transaction prices. These lenders have not only been regularly wrong on the degree of price change but on the direction – predicting rises when prices fall or vice versa.

So by choosing to predict house prices the OBR is not only entering new territory for a government agency, it is being very brave. Because this is the one indicator to which the public can relate, it is the one they will remember if it proves wrong.

Hmm. Better bring in that mortgage cap, 40 CGT% and interest rate rises now then!

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The OBR reckons house prices will rise by 5.9 per cent this year, 1.6 per cent next year, 3.9 per cent in 2012 then 4.5 per cent in each of the two following years.

Hang on, I've been to this happy place. They have flowery meadows and rainbow skies, and rivers made of chocolate, where the children dance and laugh and play with gumdrop smiles.

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that is weird - must be some computer model that fails to consider the possibility that houses are in a bubble??

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panic over - they're not trying to predict the at all, not in any clever way, just sensible and not smarty-pants, fair enough - here is their methodology:

3.30 For the purposes of the public finances, we assume that house prices follow the median of independent forecasts over the next two years, before growing at a rate that is broadly in line with long-run average earnings growth.

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If the OBR is right, prices will be 22 per cent higher in 2014 than they are today – which would be a 33 per cent increase from spring 2009 and take values back above their 2007 pre-crunch peak.

Let there be no doubt that is statement has been passed in front of the government before it was published.

And so there we have it, in all its glory.

Who could have thought that with a parliament of BTL landlords run by bankers the government and bank of england would do anything other that engineer further HPI.

Shame on me for having doubts. Shame on those who believed the new government would make a change.

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The OBR reckons house prices will rise by 5.9 per cent this year, 1.6 per cent next year, 3.9 per cent in 2012 then 4.5 per cent in each of the two following years.

The vanity is just laughable that any person or institution thinks it is worth making a forecast for house price growth in 5 years time to the nearest 0.1 percentage point.

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I've looked for a thread on this but can't see one:

http://dofonline.co....-prices-234324/

Hmm. Better bring in that mortgage cap, 40 CGT% and interest rate rises now then!

I was very worried by that. So I went to research their "methodology". Here from the original report:

"3.30 For the purposes of the public finances, we assume that house prices follow the median of

independent forecasts over the next two years, before growing at a rate that is broadly in line

with long-run average earnings growth."

http://budgetresponsibility.independent.gov.uk/d/pre_budget_forecast_140610.pdf

The lazy b@stards. And I thinking that they did serious and complex macroeconomic analyses! :rolleyes: They just sent some junior trainee to ask around! Or Google it! The b@stards!

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that is weird - must be some computer model that fails to consider the possibility that houses are in a bubble??

You too overestimated them Si1. See my post above. :(

Edit: delete that. I've just seen that you had got it well before me. :)

Edited by Tired of Waiting

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Hang on, I've been to this happy place. They have flowery meadows and rainbow skies, and rivers made of chocolate, where the children dance and laugh and play with gumdrop smiles.

I know the place, the traditional Sunday roast is cuckoo, served with clouds.

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You too overestimated them Si1. See my post above. sad.gif

Edit: delete that. I've just seen that you had got it well before me. smile.gif

no worries.

I honestly think they are being sensible here.

90% of the time what they say is a fair underlying assumption. It is not their job to predict bubblkes. That is for the BoE and the Treasury. The BoE and treasury will take the OBR reports and say this is all fine, we qualify it with the belief house prices are in a bubble.

Their job is NOT, repeat NOT, to introduce complexity into analysis of the public finances - complexity is what allowed Gordon Brown to massage the figures. Transparency, even honest transparency with honest clear underlying assumptions with known and transparent limitations, is an asset in this case.

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"3.30 For the purposes of the public finances, we assume that house prices follow the median of

independent forecasts over the next two years, before growing at a rate that is broadly in line

with long-run average earnings grow[/b]th."

Ha ha ha. I bet they use the same ruler and red crayons that Merv uses for the inflation fan charts.

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The whole thing just fills you with confidence for the future, doesn't it?

Meet the new boss - same as the old boss. Scrap a quango - start a quango

Just more of the same old BS

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I was very worried by that. So I went to research their "methodology". Here from the original report:

"3.30 For the purposes of the public finances, we assume that house prices follow the median of

independent forecasts over the next two years, before growing at a rate that is broadly in line

with long-run average earnings growth."

http://budgetresponsibility.independent.gov.uk/d/pre_budget_forecast_140610.pdf

The lazy b@stards. And I thinking that they did serious and complex macroeconomic analyses! :rolleyes: They just sent some junior trainee to ask around! Or Google it! The b@stards!

Assuming there is such a thing as an independent forecast...

e.g. 7 forecasts to 2014:

Foxtons 30%

RICS 27%

Estate agents 25%

CML 22%

IMF/OECD -32%

HPC.co.uk -42%

Eric Pebble -60%

Median is 22%, mean is -4.3

Their stats is pathetic; they need to go back to their blindfold dartboard method which has held them in such good stead over the years.

Edited by roadtoruin

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What cynical lot you all are. The office of Bullsh1t and Robbery was set up to ensure that there was no made up drivel from the government that made things look better than they are. Everyone that works for it is totally new. All the old experts were paid up Labour members and spent their evenings drooling over photos of Margaret Becket. Clearly none of them were suitable for this new task. In keeping with the government's pathetic attempts to cut the public sector the new experts are all gap year students doing their A level business studies. Give these kids a chance. They have never had a real job and of course they find all the stuff on Google. That's where they will buy their dissertations for their degrees and get all their homework from. That is the new education system. Its much cheaper than the old one. All these kids know house prices only ever go up 'cos their dad told them.

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no worries.

I honestly think they are being sensible here.

90% of the time what they say is a fair underlying assumption. It is not their job to predict bubblkes. That is for the BoE and the Treasury. The BoE and treasury will take the OBR reports and say this is all fine, we qualify it with the belief house prices are in a bubble.

Their job is NOT, repeat NOT, to introduce complexity into analysis of the public finances - complexity is what allowed Gordon Brown to massage the figures. Transparency, even honest transparency with honest clear underlying assumptions with known and transparent limitations, is an asset in this case.

My concern is that the main media and HPI vested interests can get those numbers and say:

"The OBR reckons house prices will rise by 5.9 per cent this year, 1.6 per cent next year, 3.9 per cent in 2012 then 4.5 per cent in each of the two following years. (...) prices will be 22 per cent higher in 2014 than they are today – which would be a 33 per cent increase from spring 2009 and take values back above their 2007 pre-crunch peak."

And the OBR is spot-on when they say that future house prices will be mainly a consequence of Interest Rates and price expectations.

I've found out that there are many more people in Britain with money enough for big deposits than I had imagined. As interest rates will remain low for longer now (Mervyn's confirmed that with this greater fiscal discipline, monetary policy can and will be looser), if the majority of these people think prices will go up, then prices will go up. Unfortunately. Hence, if the media spin this OBR report... it'll be a strong factor supporting prices.

BUT only the middle classes have these deposits. Hence, what happens in cheaper areas? BTLers? This only works if tenants can pay, and they won't. UNLESS housing benefits is big enough to support the market.

THAT is my current question: how big is Housing Benefits? Is it enough to put a floor on the rental market? :unsure:

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If we stagflate to the tune of about 25%, that prediction is going to come true :(

I'm pretty sure the consensus here is for Bi-flation... rises costs, deflated wages and assets.

Basically were in for a big fall in the standard of living.

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Guest sillybear2

I'm pretty sure the consensus here is for Bi-flation... rises costs, deflated wages and assets.

Basically were in for a big fall in the standard of living.

Apparently there's been a peasants revolt in the Commons and they've successfully claimed the head of their new "independent" fee's office.

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My concern is that the main media and HPI vested interests can get those numbers and say:

"The OBR reckons house prices will rise by 5.9 per cent this year, 1.6 per cent next year, 3.9 per cent in 2012 then 4.5 per cent in each of the two following years. (...) prices will be 22 per cent higher in 2014 than they are today which would be a 33 per cent increase from spring 2009 and take values back above their 2007 pre-crunch peak."

And the OBR is spot-on when they say that future house prices will be mainly a consequence of Interest Rates and price expectations.

I've found out that there are many more people in Britain with money enough for big deposits than I had imagined. As interest rates will remain low for longer now (Mervyn's confirmed that with this greater fiscal discipline, monetary policy can and will be looser), if the majority of these people think prices will go up, then prices will go up. Unfortunately. Hence, if the media spin this OBR report... it'll be a strong factor supporting prices.

BUT only the middle classes have these deposits. Hence, what happens in cheaper areas? BTLers? This only works if tenants can pay, and they won't. UNLESS housing benefits is big enough to support the market.

THAT is my current question: how big is Housing Benefits? Is it enough to put a floor on the rental market? unsure.gif

fair point. I think the downward forces are bigger, long term, than ANY current upward forces. Maybe therefore price falls will be long term and gradual. Overall this is best to avoid shocking the economy, but it puts off my own home purchase another decade. However, those using that available cash to buy now will lose a lot of money in real terms while I make plenty of wonga elsewhere. But yeah it is frustrating.

Edited by Si1

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Yes, this was mentioned on Conservativehome the other day. Even the Tory drones dont think its likely (or desirable) - guess the OBR is still chock full of liebour civil servant snake oilers.

ah yes that must be it. or perhaps the torys have more VI i HPI than labour?

Just sayin...

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  • 259 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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