Property prices can be predicted

[nickbooker]

It is possible to predict property prices. The key is not to give a date (that's crystal ball nonsense) but offer a set of key indicators. Below are thoughts on the most important - affordability.

The key factor in determining where we are in the property cycle (and therefore when to buy and when to sell) is the affordability of buying property of new entrants (buy-to-let and first time buyers). They are the lifeblood of the market and (hopefully!) are bringing cash from elsewhere in the economy (eg. savings) into property. In recent years MEWing for buying property either for children or investment has been a principle cause in the massive HPI.

The company I work at has researched, at length, methods for determining affordability to localised levels and on a historical basis to allow for prediction (future movements) and proof that it works (past performance). I do not mind sharing some of our findings with you. If you use inflation adjusted house prices and factor in typical mortgage costs you can create a model that allows you to interpret where we are (or were) at anypoint in the property cycle. (There are secret ingredients(!) to this research but those are the key variables.)

We have done a great deal of research into this and have statistics for every region in the UK. By factoring in estimated interest rate and house price rises/falls you can determine the stress level that new entrants cannot bear. At this point the market is not sufficiently supported and falls. When the stress level has not been reached the house prices rise.

The research proves that property was affordable in the mid to late seventies and mid eighties. It also shows that property was unaffordable in 1973, 1981 and 1989. Guess what happenned next in all those year? More interestingly property in the nineties was "exceptionally" cheap. Hence the unprecedented boom in the past 6 years. This is not all that surprising - the accuracy and regional affects are. For example the graph shows why Manchester and Liverpool were excessively cheap in 2000 but are not any more.

We are now at a point where we are reaching the historical peaks again. This has happenned because house prices are so high but more worringly it comes at a time when interest rates are historically low. If rates hit 5% the London market will suffer massively (a drop corresponding to the amount affordability has decreased 22% -although it is likely to overshoot this for pyschological reasons). The rest of the UK is actually a lot better off and can sustain rises of a further 10-25% (depending on the area). Obviously a corresponding rise in rates (to about 5.5-6.25%) would stop this short.

The model works accurately and successfully at predicting times and areas to buy property - it is proven because it mirrors exactly what has happenned in every region in a thirty year time period.

Predictions:

There are areas where gains can still be made.

However in time those same areas will fall below present market levels along with everywhere else.

London will be first to fall then the ripple will spread.

This can only be prevented if rates go down below present levels or earnings rocket.

I apologise for the long post. I would appreciate your comments. If you are interested (I hope I have housepricecrash's permission to say this but understand if i do not) please check our free property news and views site

In2Perspective Website

I would greatly appreciate feedback and am more than happy to speak to anyone - my details are on the website as is a press release with an example of the above.Press Release including London and UK affordability graph

Yours,

Nick

[George Mainwaring]

Facinating. Any chance of it being put online to allow queries by postcode?

[nickbooker]

Thank you for your interest.

I would love to be able to do this. Unfortunately some of our backers do not want information with that level of detail to be in the public domain. I am sure you can appreciate why!!! The regional information will however be released periodically. Registered users of the site will be notified as and when this happens.

[Sledgehead]

Nice site with a good colation of material. I can't see HPC having problems with your post (even if it is advertising your site) as long as you :

a ) don't start a forum at your site;

b ) don't start advertising "investmet opportunities for a small % commission" on this forum.

[Gavin]

Nick, when one is wondering around in a pitch black room, and being prodded by electric cattle steerers from Bulls, it is always nice to hear another voice in the darkness.

"Is someone else in here?"

"Yes".

"Scary isn't it?"

"Yes, but I think I have finally found the light switch."

I hope HPC and In2perspective can copulate and multiply the message.

"Let there be light....".

[gilf]

Predictions:

There are areas where gains can still be made.

However in time those same areas will fall below present market levels along with everywhere else.

London will be first to fall then the ripple will spread.

This can only be prevented if rates go down below present levels or earnings rocket.

Far be it for me to p*ss on anybody's strawberrys. But isn't this pretty much what we have all been saying.

Seem's you've done a hell of a lot of research and come up with a load of statments we could have come up with.

Maybe I'm just a little bit too cynical but just seems like an elborate ploy to get people on here to visit the web site.

By the way.... I've been doing a load of research and found a mathmatical formula which can predict the property market. I have made the following predictions on the results.

Prices are currently overvalued

FTB's can't get on the ladder

A drop will come in the next few years

Check out the website where I don't for obvious reasons go into any detail about it. www.v60consulting.com

[Gavin]

Gilf, are you a member of the US military?

You are not supposed to shoot at your allies, you are supposed to shoot at the opposition.

Nick went through the proper channels and asked the webmaster permission to post and put a link to his website.

We do not display acts of vitirol here.

No 'Kirsties' please.

[nickbooker]

I have only just discovered this site I apologise for jumping in without looking at what has already been written. I hope I haven't repeated too much of what has been already said. I don't think there is any harm in reinforcing points if they happen to be correct!

I am truly hurt by your satirical attack on my blatant self-publicity! I commend you on your own efforts!

If anything the website says a great deal that I don't have time to retype here. For the record these are my personal opinions and should not be taken to be those of in2perspective - an independent and impartial news and views service. Oops I did it again!

Any comments on what I had to say? Or does it simply reinforce the feelings of the other members?

[George Mainwaring]

Welcome Nick. Please stick around and feel free to alert us to new articles on your site. Assuming the webmaster hasn't beaten you to it

[EmpiricalBear]

Don't you guys get it?

This "prediction" may only act to back up the arguments of the pro-bubble lobby that the BoE should not raise rates any further.

There is a concerted attempt by Hometrack etc. to prove that things are now going down in order to stop further interest rate rises. I think that this article feeds into this effort. Hometracks attempts are particularly laughable, 0.1% drops are hardly worth calling drops.

Also, please note that its very easy to predict what happened in the past!

[EmpiricalBear]

Oh yes, I forgot. The give away about the ideology of this document comes on the page after the graph (sorry but the graph doesnt appear too clear to me anyway).

To quote from the document...

"Quotes from independent property expert Nick Booker of in2Perspective :

A rise in rates to 4.75% means Mervyn King has just snatched £1.25 billion from UK homeowners pockets"

This quote uses completely politicised language such as "snatched" and is far from a simple rational statement. It is propaganda.

Dont believe anything you read on that site, it is just another organisation trying to cash in on the boom through advertising etc. etc.

[George Mainwaring]

BoE doesn't set interest rates according to HPI - so their efforts are pointless.

[BBB]

NICK.........

nice site, ive clicked it into my favourites and will pay you a handsome sum if you can source more bullish news, to keep these guys off my back...... LOL.......seriously though nice site!

regards BBB.

[nickbooker]

2MeterBear - thank you for taking the trouble to read our work! I agree with your comments on that particular quote - the language (eg. 'snatched') is however targeted for the attention of journalists - it was actually the Times top quote of the week in last Saturday's paper. I'm afraid that is the nature of the media game. We are not anti-rate rises. The site is impartial and independent providing positive and negative views as well as all the important/interesting news.

Press Releases are designed to grab attention - I am sorry you found the language politicised.

Personally I would like to see rate rises so we don't have a massive system failure in the property market (inevitable if prices continue to race ahead of inflation). We are not an advertising led site - is there such a thing anymore! Google ads are used to improve a sites ranking on google - the income is peanuts compared to the costs of running a site like ours.

We did not "predict" the past, our analysis was proved by the past - the research fits because it uses sensible common sense principles.

I find the idea we are cashing in on the bubble amusing - so would our clients who we constantly have to restrain from making rash purchases!

I thank you for your comment and hope the above clears up our position a little for you.

[Time to raise the rents.]

Also, please note that its very easy to predict what happened in the past!

I liked that one!

Nick,

Whenever I meet someone that I suspect is in the game of relieving others of their cash, I ask them as sincerely as I can:

How do you earn your crust?

An answer to this simple question often changes my opinion on some people, but sometimes it re-inforces it.

[nickbooker]

In2Perspective provides newsletters and content feeds for third party companies - we are a publisher. We also act as an introducer of finance business and work along side financial advisers providing a consultancy service in addition to the usual mortgages, insurance and investments you would expect from an IFA. Come and meet us to see if this would help or interest you - naturally our financial review is free. We also source OFF-market deals in the residential and commercial property markets for everyone from buy-to-lettors to pension funds. The number of transactions we have been involved with has been dramatically reduced in the past year as our confidence has waned. Most of our sourcing is now at the top end of the market dealing for example in pre-let portfolios. Some people can't be dissuaded despite our best efforts! We wear are heart on our sleeves as I believe the website demonstrates.

I hope this helps alleviate your concerns.

[Time to raise the rents.]

Nick, You're not the first salesperson to post at this forum.

Anybody remember the poster titled The Property Wizard?

Do you have independant verification of the accuracy of past predictions?

[nickbooker]

"Time to raise the rates"

The data supports itself. You simply wind the model back to the time you want to test. The model then either shows below historical average by x or it shows above by x. Because we know the range (peak to trough) of the average cycle (they are remarkably similar except for the one we are in know) from historical data you can tell how far up or down the index will go. The key is understanding three things affect it - rates or prices but more importantly inflation.

At the moment the model shows that this index must go down below its current point - either because rates or house prices will fall. By looking at future paths of inflation you can tell where rates are likely to go - at the moment received wisdom is slightly up. This will be enough to take us through the barrier (5% rates are London's stress level) and into a downturn in prices.

It has been a long day and I haven't time to re-read that so I hope it makes sense. I'm not here as a salesperson - I'm here to debate and find out peoples thoughts. The Property Wizard sounds plain weird!

[Time to raise the rents.]

Nick,

As far as I'm concerned, your business is a symptom of the new market the UK is now in. You will claim to be able to predict where things are going, disclaimed by things which are beyond your control. At the end of the day, the customer walks away with the responsibility and you walk away with 2 months salary in one transaction.

The Property Wizard posted about 10 nicely worded posts claiming to know the ins/outs of the entire market and that he could predict where the money to be made is. As usual, he was promoting his website, his service, and what did he do? He helped people find unique deals that only his organisation could source. Fortunately, he could also help with finance and any other service needed. He also sold a nice course helping those with spare cash to learn about property.

We also source OFF-market deals in the residential and commercial property markets.

No doubt OFF-market because you've negotiated that with the seller.

The number of transactions we have been involved with has been dramatically reduced in the past year as our confidence has waned.

So you've decided to stop selling, or would that be due to the customers not biting as much as they used to?

Your business may be more than sales & marketing and I don't dispute your right to earn a living. But I personally have seen plenty of small businesses basically catching the money that falls between the cracks while leaving their customer holding bags of dirt worth a lot less than they paid.

I recognise that my post sounds very hostile & I mean no personal offence to you, but I think it's important for some less weary posters to recognise when they're being invited to buy something. I personally don't like dealing with people that require me to bring out my wallet for it to be worth their while dealing with me.

Unfortunately our world is full of that kind of person though.

[Time to raise the rents.]

BTW, independant verification involves going to a recognised authority prior to the events predicted taking place.

Going back through a chart or spreadsheet or database etc allows a person to see what outcome they would have had using certain known or desired inputs (price, gearing, yield etc) versus actual outcomes, doesn't mean you've found a way to predict the future. Because you knew the outcome before you put the inputs in!

Off with Lurker & I Told You So. They also have dead cert winners for the future (sorry guys, just trying to make a point for other readers).

Now, back to making my own personal judgements on the future, Mmmm, I wonder if I can get anyone to pay me for it.

[Desert Knight]

I tend to agree with TTRTR - nearly a first for Me!

This smacks to me of the typical "We can make you money" website, lots of headlines that seem at first sight to show both sides but definately skewed towards "you can't go too far wrong with property".

And then I looked at a newsletter and found this gem....

In2Perspective are running a series of seminars in the Autumn called “Home Truths”. These will not ridiculously priced sales pitches but genuinely useful and friendly expert led discussion. One of the topics we will cover exposes the myth that is buy-to-let. Showing why it rarely provides profit, or pension benefits, even over a thirty year period!

I just want to stand back and see how BBB and TTRTR get on with Nick over this one.

[BBB]

yeah i must admit on hindsight the site does lack sparkle to say the least (only kidding btw)

[nickbooker]

"We can make you money" website, lots of headlines that seem at first sight to show both sides but definately skewed towards "you can't go too far wrong with property".

I don't think that is what our opinion is!!! I find it amusing that is what you infer from the website - we are pessimistic to say the least - in2perspective provides all the news and views - inevitably that means positive stuff gets reported as well as negative! That's the point about having impartial content.

The "Home Truths" seminar "exposes the myth that is buy-to-let. Showing why it rarely provides profit, or pension benefits, even over a thirty year period!" This is hardly promoting buying property!!!

Perhaps the more cynical types would like to come along. If you meet me and hear what I have to say you will perhaps understand my motivation is not to 'sell property' its to build relationships with people based on expertise.

I am enjoying this badinage but would prefer to be talking about the market and peoples views. Glad you read the newsletter though Desert Knight. What were your thoughts?

[Desert Knight]

Nick,

I am certainly a pretty cynical person, i'll give you that! Even more so when it comes to a company with vested interests in the ability to be able sell property to investors.

As a property consultancy we have two core business activities. The first is providing news and information to people buying and selling property. The second is sourcing property deals for residential and commercial property investors.

It is in the interest of your company to ensure you leave the impression that there are still real bargains to be had.......if you are an "expert", know where to look and how to read the signs.

The newsletter, to me, was a way to get worried people to come to yourselves and pay for advice that is probably as sound as the advice found on this bulletin board. Sorry, you haven't sold it to me!

[gilf]

We do not display acts of vitirol here.

No 'Kirsties' please.

Sorry if my post came across as vitriol it certainly wasn't meant to.

I think other postes have elloborated as to why I said what I did. Its often difficult to read inflection in these posts. If I had included a then you would have read the post in the way it was intended.

By saying no "Kirsties" please are you saying you don't want people with a different point of view to your own.