What Are You Predictions For 2006?

[Jason]

Ok, we have had a bounce in prices just when the indices were about to go yoy negative mainly because of the interest rate cut and the expectation of more to come (along with all the spin). I didn't expect this bounce, and i'll admit i'm wrong. But I don't think alls well in the housing market and the broader economy.

So, how do you see things unfolding in 2006?

Be brief and to the point!

[TheEmperorHasNoClothes]

8-12% down, depending on the Index.

No guarantees. No sweat, if it proves wrong. I am happy to keep renting

Good attitude. There is no reason to buy into housing at current prices, and if they don't fall then there will never be a reason to. Owning a house is not essential to live a good life.

Edited:

I may as well answer the original question. I think house prices will fall by 5% next year. I'd like a further fall but I don't think it will happen. There are too many vested interests propping up the market. The 5% fall will consist of bigger falls in the south east 10% and stagnation or rises in the north.

Edited November 6, 2005 by TheEmperorHasNoClothes

[I don't believe you]

8-12% down, depending on the Index.

No guarantees. No sweat, if it proves wrong. I am happy to keep renting

Dream on mister.

Houses are at best 15% overvalued. At that there is just no incentive to hang on five years for a few poultry £.

[Guest muttley]

Houses are at best 15% overvalued.

How did you work that out?

[TheEmperorHasNoClothes]

Dream on mister.

Houses are at best 15% overvalued. At that there is just no incentive to hang on five years for a few poultry £.

So for a £150k house thats is £22.5k overvalued! Not a few poulty pounds is it?

Plus renting isn't that bad - in fact there are advantages!

[Jason]

Jason, I don't see a bounce in house prices, just indices:

Ok, fair point.

I think prices will slowly decline from now on, but sentiment will still hold because of the spin on SIPPS (I know it will have little to no effect, but the spin will have effect on sentiment). If interest rates rise, falls will be far sooner.

I think the tax increases (e.g. council tax), increasing living costs (e.g. fuel), poor wage increases (in comparison to real inflation) and increasing unemployment will all drive the market lower with the general economy growing very slowly (possibly in recession by the end of 2006)

Also, with the shear amount of available properties coming on to the market buyers will be spoilt with choice, and the 'missed the boat/must buy' culture will have gone. By the end of next summer we may see big falls.

Of course, things change all the time. E.g. if IRs fall (I can't see that happening, but 'if') it will just delay the inevitable. If IRs go up, everything will be that much quicker!

If there are fuel shortages this summer (e.g. gas, elec (3 day week??)) it will just reinforce how vulnerable we all are, and people will think more about tomorrow!

By the end of 2006? A 'real' (adjusted for inflation) fall of 8% or more.

[Guest Bart of Darkness]

Houses are at best 15% overvalued. At that there is just no incentive to hang on five years for a few poultry £.

Not with bird flu about I agree (HINT: it's paltry, not poultry).

However, if you think that prices will fall by no more than 15% over the next five years (i.e, not go up) I might as well carry on renting. After 5 years I'll be able to buy outright, saving £££ in mortgage interest.

Edited November 6, 2005 by Bart of Darkness

[brainclamp]

Could houseprices be UNDERVALUED?

Certainly a possibility if you are an investor with government largess at hand. As long as the BOE prints/lends £1.20 for every £10 in existance I would expect HPI to keep rising as in New Zealand. As long as immigration cuts wages then people have no choice but to watch prices rise upwards and real wages drop.

[oldmisery]

chelsea champions by easter

[Starcrossed]

Tax rises and gradual erosion of jobs.

House prices to go down but how much depends on IRs and whether the BoE sticks to it's remit on inflation.

-5%?

I find it hard to predict how the possible/likely ascension of Brown will affect the economy. Any thoughts?

[Guest Riser]

Dream on mister.

Houses are at best 15% overvalued. At that there is just no incentive to hang on five years for a few poultry £.

Nationwide data indicates prices are 40 - 55% over valued compared to the long term trend, the value depends on where you are in the country see attached graphs.

A for next year I expect to see falls of 3% by May then an increase in the rate of falls to 1-1.5% per month late next year as interest rate cuts are reversed and BTL rush for the exits.

Nationwide HPI graph

Regional Over Valuation

Edited November 7, 2005 by Riser

[kevino]

Good attitude. There is no reason to buy into housing at current prices, and if they don't fall then there will never be a reason to. Owning a house is not essential to live a good life.

Edited

So why do you lot whinge about houseprices being too high???

I'm not a bull, I think they'll come down but I challenge the motivations/bitterness/jealousy of some on here.

Dr. Bubb spends most of his posts on here forecasting dire falls/crash. Now in this thread he's placing a "get out" clause. "If they don't no worries"

MAKE YOUR MINDS UP PEOPLE!!!!!

Not with bird flu about I agree (HINT: it's paltry, not poultry).

However, if you think that prices will fall by no more than 15% over the next five years (i.e, not go up) I might as well carry on renting. After 5 years I'll be able to buy outright, saving £££ in mortgage interest.

Or you could be like me and bought right, spent all this time overpaying my own mortgage saving loads on interest and not helped pay a landlords mortgage either..................................

[Bagehot]

I think we may have to wait until 2007 before we see significant falls. We arent going to enjoy/suffer a economic crash, but a slow decline over the coming years.

[kevino]

I think we may have to wait until 2007 before we see significant falls. We arent going to enjoy/suffer a economic crash, but a slow decline over the coming years.

So is the site to be renamed www.housepricedecline.co.uk?????

[IMupNorth]

Its going to be one long hard slog, waiting for your House Price Crash that is.

The economy is doing fine, its not going 'boom' like it was before, but its just pottering along nicely. Mr Brown may have to trim his public sector expansion plans a bit, but not a lot. Foreign investment is pouring in to this country. Company profits are at a record high. Employment is at a record high. Immigration is an open door. All these things will support house prices.

IRs are low and won't be going up, as oil costs fall after the winter, so will IRs - this will be regardless of $ rates.

The governments plan is that we converge with Europe - hence our IRs will fall to meet the Euro IRs and our econmy will converge with Europes increasingly (may take 3 years in total). If Labour win the next election, then monetary and constitutional union will be a foregone conclusion.

So next year HPI = 0% some areas up, some down

IRs 4.00% by year end.

Pay increases = 3.5% - lower paid jobs 2% max, higher paid 5-10% min

Like for like retail sales 1% increase

Manufacturing down (not sure by how much)

Services expansion +3%

Employment rate, steady as she goes at 75%

Net immigration +100,000

Bankruptcy +20%

Personal debt increases to £1.2 trillion

CPI = 2.2% by year end

[Once in a lifetime]

Water, water everywhere, and recycled urine to drink. The ice-caps have melted, and humans have split into three groups: eco-communities living together on deep-anchored, heavily guarded atolls; piratical 'Smokers' monopolising the scant reserves of oil; and lone mariners sailing in search of trade.

[oracle]

Ok, we have had a bounce in prices just when the indices were about to go yoy negative mainly because of the interest rate cut and the expectation of more to come (along with all the spin). I didn't expect this bounce, and i'll admit i'm wrong. But I don't think alls well in the housing market and the broader economy.

So, how do you see things unfolding in 2006?

Be brief and to the point!

DOWN,DOWN...DEEPER AND DOWN!!!.

btl will get wind of sipps being a white elephant and will be forced to sell!

...through a combination of higher IR's and post christmas lay-offs by the retailers.

HPI next year IMO -6%.

I think we may have to wait until 2007 before we see significant falls. We arent going to enjoy/suffer a economic crash, but a slow decline over the coming years.

...yes,I'm pretty sure thats when the turds get flushed down the bog.....all the BTL will be in no doubt that houses are NOT going back up,so they will start to sell en-masse.

HPI guess for 2007 -15%

2008 -10%(would have been -20% at trough but I think there will be some buing back in here)

2009-2012 broadly flat....+/- 2%

[boom_and_bust]

Hi,

Patience, patience, for this is the interesting year ahead. Some of the posts get very murky and confusing with the current round of VI soft landing spin circulating around. Let's recap where we are now ;

A year or two ago HPC was completely dismissed. Prices on many indices were still rising at double digit levels, there were a few academics and analysists making grumbles about the state of the economy but generally it seemed that all was fine.

In the last year just look how the landscape has changed. The VI spin has moved to a stagnating, soft landing of flat prices and just recently talk of how some modest declines may occur for just a short period. Don't be fooled by it. Just look up how they reported it in the media during the past two crashes, particularly the Nationwide and Halifax. The long and short of it, when you see a housing market and personal debt levels rise to historically, unprecedented and unsustainable levels over the course of 7-10 years that then slow to a halt, what do you expect to happen next? We are at the turning point of the market, the top was maybe a year ago, it can only be down now in the face of a failing economy and no more engine of growth available. Personal debt expolosions and public sector expansion helped provide the fuel, both are (and have to be) cut back in the coming period. It is important to remeber it, look at history and other HPI countries now so as not to get lost in the VI spin and the less convincing bull posts. If the economics of it changes, then maybe. However, as it stands, the kind of economic rebound required to even sustain the current levels has never occured before, it is literally an economic miracle that would be required from now on.

That said, the VI spin is immense this time around, maybe stronger than the previous occassions. BoE has obviously sold out and is making decisions contrary to the needs of the economy in order to try and prop up the failing housing market. I have little doubt it is useless, the fundementals left a long time ago. Maybe the coming year could hold out at 0-2% YoY growth for another six-eight months, by the year end of 2006 I think economic factors will start to show some small, month on month falls, maybe the odd, full 1% here and there. That will be market top emerging at the other end. 2007 would likely fall more regularly with 1% MoM falls. It took 7-10 to rise, so expect a sluggish, sometimes rising, often falling, drift down over a space of 4-5 years, maybe market bottoming at 2009-2010. If the economic horizon changes, I will reconsider my views as necessary but I lived through two previous crashes and I have observed the housing markets of three other countries at first hand, I follow business and economics around the globe closely.

Boomer

Edited November 7, 2005 by boom_and_bust

[oracle]

not inclined to disagree boomer.....and if you are a follower of business and stocks etc,then you know that it is unlikely to be a controlled slowdown given the amount of spectulation in the market.

the typical graph for a speculative bubble is useful....like nasdaq.

I'm not saying the percentages will be similar,or the speed.Just the action of the drop.

it will probably(quite shortly) resume it's drop.....with YOY negative perhaps by christmas and then down to maybe -2% by the time "a" day arrives.

...we'll then get a very short-lived spike to zero YOY I suspect....but after that,we will be looking at BIG drops (1%+)and accelerating in speed.

when we hit bottom don't be at all surprised to see some MASSIVE(3%+ PER MONTH FOR A COUPLE OF MONTHS).....this is natural,and conversely it's the best time to buy.

[boom_and_bust]

not inclined to disagree boomer.....and if you are a follower of business and stocks etc,then you know that it is unlikely to be a controlled slowdown given the amount of spectulation in the market.

the typical graph for a speculative bubble is useful....like nasdaq.

I'm not saying the percentages will be similar,or the speed.Just the action of the drop.

it will probably(quite shortly) resume it's drop.....with YOY negative perhaps by christmas and then down to maybe -2% by the time "a" day arrives.

...we'll then get a very short-lived spike to zero YOY I suspect....but after that,we will be looking at BIG drops (1%+)and accelerating in speed.

when we hit bottom don't be at all surprised to see some MASSIVE(3%+ PER MONTH FOR A COUPLE OF MONTHS).....this is natural,and conversely it's the best time to buy.

Hi,

Yep, it could easily go that way. In reality, that is the way it should go. I have been puzzling over the last six months how, in the face of the current economic factors, how so many economic groups like the OECD, IMF, etc., independent analysts and investment bank economics departments can broadly agree on price corrections on the horizon, that the market has held the stagnation for any period at all. It was that comment that the current BoE chief economist made this year that *** a housing price stagnation could be held up if economic sentiment could be steered away from negative thoughts ****. I don't know if anyone really picked up on the magnitude of that comment, I personally think it is breathtaking, bodering on professional mal practice or corruption (some could say, we of course on the forum do not imply this). That is the force of the VI spin on things.

For me, that confirms BoE are not independent and are sacrificing the economy in a vein attempt to prevent the inevitable in the short term. It will just make things worse in the long run. The Dutch tried it and it failed spectacularly and their economy was not debt driven at the time of their property market decline, it was in really good shape. Somehow, I don't see Gordon coming out like the Dutch chancellor and announcing it was an error and things may get bumpy. Cripes! Tony is a BTL landlord himself! And just look at the political landscape. The government has at the same time commisioned reports into 'problems in the housing market for FTB' and 'effects on small communities of rising house prices for second homes'. Well, that is a dead easy one to solve. You bring back mortgage tax relief for FTB's as in the old system or for small or rural community workers. Why haven't they done this? When it has been done in the past? Why have they instead distorted the market in favour of BTL investment (SIPPS) etc.,? It is obvious. There is no housing shortage, percieved problems with FTB and rural workers could be solved tomorrow with the tax system. This is the force of damage the current administration are prepared to go. It is flawed thinking that will inflict terrible damage on a debt based economy.

For that reason, I see the current shower pulling as many dirty tricks as they over the coming year to try and present the stagnation argument. Taking a look at the reporting of the last crash, maybe we can draw a comparison with the 1990-1991 period for now whereby the market was also presented in stagnation mode. That did last maybe 20 months before it was really too obvious for most people and VI, journos and politicians were risking all personal credibilty with the stagnation line, so it is very much in keeping with history. Where it is different is the current level of pricing and debt, the falls could be even bigger this time for that reason. The plateau could could drawn out by combinations of factors for an extra 6-8 months for these factors.

[oracle]

[

For that reason, I see the current shower pulling as many dirty tricks as they over the coming year to try and present the stagnation argument. Taking a look at the reporting of the last crash, maybe we can draw a comparison with the 1990-1991 period for now whereby the market was also presented in stagnation mode. That did last maybe 20 months before it was really too obvious for most people and VI, journos and politicians were risking all personal credibilty with the stagnation line, so it is very much in keeping with history. Where it is different is the current level of pricing and debt, the falls could be even bigger this time for that reason. The plateau could could drawn out by combinations of factors for an extra 6-8 months for these factors.

well we are at something approaching 18 months of a soft-landing scenario in which time HPI overall has reduced from 22% p.a to 2%.

......that sounds very soothing but masks the real picture,where property in the south has fallen by about 5%,but north has been rising by 10% or so.

given that the boom started in the south and moved north,so will the bust...so I'm perfectly happy with the way it's progressing....I'd give the soft landing tripe until easter....then the tone of the VI's will change to something like "moderate easing in prices",just like they did in the last one.

[shermanator]

HPI down 5-8%. London to lead way by 10% drop. Have to say, the resiliance of this property boom has surprised me.

Economy as a whole; Retail spending to accecarate its decline. Clothing (****, NEXT and others), DIY chains, furniture and carpets to go bust; anyone remember Queensway Carpets going under in 1990? Unemployment to rise, banks bad debt provision to rise, reposessions to rise, bankrupticies to rise, new car sales to continue their decline.

In summary, not looking good.

I've noticed that, while the Great British Public have cut back their spending on fashion and cars, eating out, trendy bars, clubbing and holidays have been immune to the consumer slowdown, so far. Any ideas why this should be?

I think I'm in a relatively recession proof industry; gaming. Could even do better in lean times!

[Jason]

apollo1966, I would like your prediction for 2006!

[dogbox]

Im very confident about UK prospects, and here's 3 reasons why;

1.) We are at the dawn of a global growth boom the like of which has never been seen. In the past a small number of western economies became industrialised and wealthy. Now its the turn of the rest of the world including India, Africa, S America etc. The UK is well poised to benefit from this. Our services and know - how are much in demand. Building projects the world over are spattered with brit know - how.

2.) The Brits own a massive amount of real - estate abroad (Spain is but one story). Most of this real estate is rocketing in value, so thats even more wealth for UK plc. This trend of investing abroad is still in its infancy. Friends are buying in Morroco, Brazil, Germany etc.

3.) As Ive argued many times UK industry is global and doing bloodi well. A clever poster called ZZq (clever in a Dr Bubb way) used to dismiss this claim saying UK industry was doomed. I spotted years ago that outsourcing would benefit us all in the longer run, and now Im being proved right despite the lack of graphs and pie charts.

[padders]

IMHO it depends if consumers decide next year is when they should start paying off their debt. If a lot of people suddenly decide they should, or are forced to, we have a problem - economy tanks and with it house prices. I don't see any sudden recession coming along but if consumers stop spending and the high street tanks (and jobs with it) this is where a problem can happen. Its really all about what consumers do - business investment would no way replace consumer spending if the latter was to fall.

My guess is that any slowdown in the economy will be caused by the very companies that have enabled the debt problems. Mortgage lenders getting worried that some of their customers can't afford their mortgages, credit card companies worried they aren't going to get their cash back and that they need to try before people declare the same bankrupt. Interest rates matter here but I am off two minds which way they are going. Oil prices will likely fall but its going to be a good year before those affects feed through to inflation reductions - and once you get high inflation is very very hard to slow it down again - cost push inflation can become cyclical even after the initial cost push has gone. That and the Fed is going to be hawkish with a new guy in charge who needs to asset authority and hawk like credentials. I would be surprised if we don't see at least a 0.5% rise over the next 9 months. This may be too much for some.

The other issue is what happens with the US economy. Their debt problems are just as bad (well probably worse). There is also growing talk about a house price correction there, especially in California where the over pricing is very evident. In california there are tens of thousands of new homes (all identical to the other 5 million) being built everywhere you look - supply will outstrip demand and prices will fall. This could set of a trend quite rapidly.

I know I am going to wait anyway; I work from home so instead of renting in London I am going to rent in a ski resort for a reason. Rent is cheaper in a top ski resort than it is in London. Easy choice for me. When I get back in 2007 I doubt prices will be any higher than now even if they havn't fallen.