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Guest wrongmove

40% House Price Rise Unlikely

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Guest wrongmove

A counterpoint to the earlier reports:

40% House Price Rise Unlikely

"For some time, the loudest commentators and analysts have been positive about house prices.

Many of you will have seen today that the National Housing Federation (NHF) expects house prices to rise 40% by 2012, with the average price then breaching £300,000. With compounding, this means an average increase of roughly 8% per year. This is in line with the long-term average, which Halifax says is 8% since 1983.

'The market is going up!'

All predictions should be taken with a large spoon of salt, of course, because many of these upbeat forecasters have a vested interest. Even so, not all the bulls are as bullish as the NHF. (A bull thinks the market is going up.) Most seem to think price rises will slow.

TFS (a dealer of complex products, which aren't for Fools), launched a Future House Prices Index in January. It found house prices back then were £184,000, and was setting futures to just £213,000 by 2012, or about £90,000 lower than the NHF's prediction.

Michael Coogan of the Council of Mortgage Lenders (CML) categorically told us in a podcast recently that there would be no crash. However, the CML reckons house prices will go up by just 7% in 2007 and only 2-3% in 2008*.

Halifax recently revised up its prediction for this year from 4% to 6%, but this is still lower than the average needed to hit NHF's prediction.

'It's gonna crash!'

The truth is, I can find many, many more predictions of continued rises than of a downturn, but here are some bears (the opposite of a bull) that I dug up:

Freelance Fool writer Cliff D'Arcy continues to be extremely bearish since writing Why The Next Housing Crash Will Be Worse!

David Miles, chief economist and MD of Morgan Stanley, said at the end of last year: 'A sharp fall in real house prices is likely at some point in the relatively near future, though it could yet be one to two years away'.

The Telegraph reported in January that Professor David B. Smith of the University of Derby, the chairman of the Shadow Monetary Policy Committee, predicted that house prices will continue to rise this year, but warned that as borrowing costs become too great for many families the market will slow dramatically, before going into reverse in 2009.

Interestingly, it's mostly individuals, as opposed to companies and organisations, who remain the most bearish. Remember to think about whether they too might have a vested interest..............."

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Analysis of the Halifax report on CityWire -

The average home in the UK is now worth £198,915, 11.2% up on July 2006, while mortgage approvals for new-buyer purchases fell for the seventh consecutive month.

From the Capital Economics/ National Housing Federation report (the bits that didnt get reported) again from Citywire -

...the National Housing Federation, ...... has described the market as ‘distorted and dysfunctional'.

And

The Home Truths report found that the average house price is almost 11 times the average salary and that more than 4 million people are currently on waiting lists for social housing.

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