Tuesday, January 6, 2009

Uk House Price Forecast to 2012

UK Housing Market Crash and Depression Forecast 2007 to 2012

In conclusion, the sum of the above analysis suggests that house prices having fallen by 19% are about half way to the lows, and therefore suggest that house prices will decline by 38% from the August 2007 peak. The housing market trend is clearly currently in the panic stage as we are witnessing near unprecedented house price falls at the rate of more than 16% per annum, far beyond that of the 1990's bear market.

Posted by nadeem walayat @ 09:31 AM (6288 views)
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42 thoughts on “Uk House Price Forecast to 2012

  • Nice graph in this piece – shows my prophesy of an accelerating fall – a true crash – to have been correct.

    Nice also to see other people at last making forecasts that begin to chime with my own long held calculations.

    But does any politician want my remedy for getting out of this mess..?

    ..oh well, can’t win ’em all!

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  • sold 2 rent 1 says:

    Walayat is basically correct in saying we will have deflation and then inflation but he hasn’t a clue with the timings. It will be much faster than he thinks. My interpretation of Calleman’s model says in the summer of 2009 we will see the switchover with a mania in gold/oil peaking around Easter 2010.

    Also, there is that pesky year again – 2012. It will keep rearing its head at ever increasing regularity. The film 2012 is out in the summer.
    Question is what does it mean? The answer is so huge with so many smoke screens covering up the truth. House prices will be the last thing on your mind.

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  • Great article. Pleased to be renting. This will help convince the wife that I was right to have sold two years ago.

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  • What facinates me is what happens when we are down 40%.

    Speak to alot of people and they say they’d buy.

    But the truth is, the only people with any equity for deposits will be those who’ve saved for a deposit through the Crash or those who are off the market.

    Most people with a mortgage will be in negative equity (ok at least half).

    The people with only very small or no mortgages (that could release equity) will likley be too old to take on new mortgages.

    BTLers would all be wiped out as far as equity release for deposits go and that’s looking on the bright side for them. If lenders issue marging calls BTLers will all be bankrupt.

    So to conclude my brief analysis – what is there to support the market at 40% off ?

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  • i remember the 90`s says:

    That is the best read ever on here and imo every adult in britain should read it because its also a scary senario which we all need to get our heads arround .

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  • japanese uncle says:

    Unemployment will soon reach 10%, and then could eventually reach 20% mark given the current momentum in deterioration. Who would dare participate in the property market under such climate.

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  • 4. str 2007 said…….So to conclude my brief analysis – what is there to support the market at 40% off ?

    Good question. Banks are in control with regards to deposits. I don’t see them lowering deposits untill they feel that they are cushioned enough.

    The last thing they need to do is get the timing wrong. With mortgage capital being an issue I feel that they will hold off as long as possible.

    Banks will be looking at unemployment, affordability, and all that old fashioned stuff they forgot about.

    I think that a 40% bottom is conservative. However, strange things do happen! So it’s nose to the grindstone and ears to the ground for me.

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  • Whenever I look at a house price chart I can’t help but see a little rally coming in somewhere like the Rocky Moutains, but I just can’t think of a reason why. LOL

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  • The indexes may show the large falls, but the estate agents must educate vendors, as they seem reluctant to drop where I live.

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  • 9. will

    I am reluctant to spend money but at some point I have to.
    Count the for sale and sold signs. It should give you a clue as to how much demand there is in your location.
    Remember these are still early days.

    Who pushed the panic button in 2009!

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  • Crunchy

    Yes they are early days. I live in Exeter having sold up 2 years ago. Some properties still coming on the market at rediculous prices. True, they are not selling, but indexes show prices have fallen here by about 13 %.

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  • UT i thought you were looking at 80% + in London.How does this analysis resonate with that? My understanding was that the original (nadeem) forecast was for a fall of 15% and that therefore this amounts to a substantial revison of that view.

    Having said that a good summary and analysis. Still think we will have a further revision down (60%ish) but am (and dont mind being wrong) anticipating a spring counter-trend rally.

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  • 11. will

    That may well be across the board. Perhaps flats ftbers houses are worse hit.

    I will start to worry when over priced houses start selling, not before.

    I think that people moving from one house to another have held prices, but as time moves on those moving will get less money for current home to re purchase pushing prices down further.

    I think that the potential of a crash only became acceptable in the masses minds around April/may 2008. Early days.

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  • No mention of Peak Oil or Gas? How can you make any sort of informed projection without at least factoring that little hand-grenade in? And if you think the matter is irrelevant since the price of oil collapsed recently (although it’s managed to inject new life into cheap motoring) just wait and see what happens in Europe if the present Russia/Ukraine pipeline energy spat continues unabated.

    Time to re-read George Monbiot’s December interview with Fatih Birol (chief economist and Head economic forecaster for the International Energy Agency); the organisation on whose data (previously ‘guesswork’ it turns out) governments base their forward economic projections.

    ‘Then I asked him a question for which I didn’t expect a straight answer: could he give me a precise date by which he expects conventional oil supplies to stop growing?

    “In terms of non-Opec [countries outside the big oil producers’ cartel],” he replied, “we are expecting that in three, four years’ time the production of conventional oil will come to a plateau, and start to decline. In terms of the global picture, assuming that Opec will invest in a timely manner, global conventional oil can still continue, but we still expect that it will come around 2020 to a plateau as well, which is, of course, not good news from a global-oil-supply point of view.”

    Around 2020. That casts the issue in quite a different light. Birol’s date, if correct, gives us about 11 years to prepare. If the Hirsch report is right, we have already missed the boat. Birol says we need a “global energy revolution” to avoid an oil crunch, including (disastrously for the environment) a massive global drive to exploit unconventional oils, such as the Canadian tar sands. But nothing on this scale has yet happened, and Hirsch suggests that even if it began today, the necessary investments and infrastructure changes could not be made in time. Birol told me: “I think time is not on our side here.”

    Read the full article here:

    http://www.guardian.co.uk/business/2008/dec/15/oil-peak-energy-iea

    Or, we can all ignore it, because it doesn’t paint a very pretty picture of our future in barely five years time.

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  • tyrellcorporation says:

    Techieman. Do you think this stocks rally has legs? I’m wondering whether to have a dabble as the gains over the last week seem to be holding steady (can’t really think why though).

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  • TC bought some Jan 4400 calls @ 80 odd on the 29th. Got out of half @ 260 last Friday at twenty to 9. So yes do think we have legs but i wouldnt be surprised to see a pullback. Have been saying this for a while now (bullish at the begining of the year, personally i am not looking for more than around 5,000 in the 1st Quarter. See this upmove as a selling opportunity (after some more gains).

    If i had no position? I would probably wait for some consolidation or a pullback to be honest. But you pays your money and takes your choice. By the way apparently between the 5th and 13th January (according to David Schwartz in the FT) since 1990 there has been one advance versus 18 declines. So he states (hes bullish for the whole year) that generally you would expect rises to be in the second half of the month (BTW the options expire on the 16th – so i am pretty much punting against that , although i am a few bob in the money, so can afford the pullback, and if it hits 4700 then i will get out of another 30%).

    Its a bit yes but no but….. but i hope that helps! As for individual shares god knows! Caveat emptor and all that.

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  • Browneconomy says:

    I can’t be @rsed to do this myself but….. would this be a good anecdotal evidence of just how bad the housing market will be over 2009: to measure the movement of ratio of properties available to those available (including “sold STC” etc)

    Look at Rightmove site select an area / property type and see how many properties are available, then repeat ticking “including sold STC” box.
    e.g today 6 Jan Frome (Somerset) has 330 properties for sale and 394 for sale including sold STC etc.
    It would be interesting to know what the ratio was this time last year (& even more so this time next year)!!

    Obviously there is a statistical skew in that in a falling market as all these struggling EA’s , Suveyors, Solicitors push sales through more quickly but still?

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  • Techieman

    I can’t remember who said it but as I recall there was talk of the FTSE being on the up for the early part of the year but the charts were pointing to a significant crash around mid April.

    Am I talking nonsense, or is your talk of a selling opportunity around the end of the 1st quarter implying the same ?

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  • str 2007 – that was probably me! Mid march is Armstrong (so that may have been s2r1) . Of course i reserve the right to change my mind if the indicators say so………a few months is the “long term” for me.

    To answer the question its “yes”, although timing may be off – the move may be so significant that a couple of bites of the cherry may be in order. Then again David Schwatz may be right and i may be wrong!

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  • nopensionnohouse says:

    Yeah, great article and all but lets face it you don’t need a million words and a dozen graphs to predict that house prices are not half way to the bottom yet. (At least Nadeem has taken on board early criticism about his graphs so they now at least appear to represent something – Well done for that Nadeem)

    Dare I say you only need common sense?

    On a slightly different note, I had a 12 hour flight yesterday and picked up 4 newspapers to read. Almost EVERY paper had an article headlining in the business section with some financial bod stating:

    “I told you so… I was the lone voice in predicting this crash”

    Er, that’s not quite how I remember it going down (pun intended)! I seem to remember it was good times all the way… and some still think it’s the good times.

    Also, I think the blame game is about to start in earnest with various hacks starting to point fingers at each other for their role in perpetuating the bubble as well as Browns obvious lack of “financial compass” in all this.

    It could get ugly and we have front row seats here.

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  • Techie,

    Across the country I have been forecasting an average fall of 40-45%, with a significant overshoot before settling at that level.

    I think the relative value of the more central London property against that in the outer suburbs is excessive. While there will always be an area for the diplomats and super-rich that writes its own rules, I think that an awful lot of inner London property is pretty unexciting and extremely overpriced.

    That said, I have never projected a fall of 80% as being a sustainable level. A lot of the property that lies between the congestion charge zone and North Circular may well settle at less than half peak price however.

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  • sold 2 rent 1 says:

    techieman,

    “Mid march is Armstrong (so that may have been s2r1)”

    Actually the Armstrong high is April 19 (not March 19) as wrongly reported in Armstrong’s own paper.
    Here is his paper
    http://www.scribd.com/doc/8813084/Martin-Armstrong-October-2008-Its-Just-Time-77p

    Strange how he can make a basic error.
    Then again he has been in prison for 9 years.

    See how on pages 29-36 he talks about the God Particle, the Mystery of the Maya, Mystery of Time and Space and other similar stuff.

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  • Cheers UT – wasnt being provocative just wanted to get that cleared up because i was confused. Maybe the 80% was so extreme that it stuck in my mind and i equated that with your average for the whole of London. It looks like i am now more bearish than you – not sure thats good or bad to be frank.

    I only hope im not just “talking my own book”.

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  • s2r1 – yes i have been wading through that (you posted it the other day) but i havent got much past Keynes / Marx yet. Thats where i got the mid march from in fact but i stand corrected. However it shows 2009.3 as the turning point. If its mid april wouldnt that be 2009.375?

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  • I completely agree with the analysis – having seen the 1990s crash first hand. To be honest, I think we are still in the denial phase and the panic phase is yet to happen. I saw the Location Location Location trash on 4more yesterday and inspite of sensible offers, sellers still think they should wait to sell – suggesting denail is still ridwe.

    Of course the shrill Allsop still frothes great wisdom in house purchase (apart from regularly showing wildly over optimistic forecasts) when she ought to be advising people to rent. I would think “rent, rent, rent” would be a lot fairer and certainly less downright misleading.

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  • sold 2 rent 1 says:

    TM,

    2009.3 = 109.5 days into 2009 = April 19 (and a half) 2009
    If I said mid April then I was just aproximating

    IMHO I think this date is significant and will win Armstrong lots of new fans.

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  • sold 2 rent 1 says:

    Before the April 19 high we have one more major drama around Janaury 23-29 – this resonates with the Suez crisis in 1956.
    I have no idea what form this drama will take.
    It could be financial, political, Iran, Russia, Israel, Pakistan…….who knows.

    23 Jan is only 3 days into Obama’s new term….could be interesting.

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  • s2r1 – its an aha moment. there are 2 ways of doing this. point 3 is based on days or months. If months then wouldnt it be 2009.3 = .3 X 12 = 3.6 months = March plus .6 X 31 days = 19. Voila.

    Or your way. 365 days X .3 = 109.5 days. 31days for Jan (leaves 78.5) 28 for Feb (leaves 50.5) 31 for march leaves 19.5 into April.

    I assume you have noticed that before..? Does he normally use the former or the latter method?

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  • 26. sold 2 rent

    http://uk.youtube.com/watch?v=33jZ34QAM1Y You may want to check out others on that page.

    This is an official Biden forcast around a month ago, but he was not willing to say what it was going to be.

    My guess is that it may be some unpopular decisions Obama will make on his first day maybe.

    Keeping an open mind!

    .

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  • Well thanks for all that info guys

    I’ve downloaded the Armstrong report you linked S2R1 and will endeavor to work my way through it.

    As far as stock market crashes go 19th April is a Sunday.

    So as far as I can tell Armstrong has been predicting the fact that on April 19th it’s my Birthday !

    That at least makes it a significant date to me.

    At least I won’t forget it.

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  • Sorry, have I wandered into the Nostradamus/Madame Blavatsky/Bermuda Triangle forums by mistake?

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  • stillthinking says:

    I really wish I had your job, techieman and s2r1 although some of the stuff you say makes me wonder, actually thats you s2r1. The Armstrong high you are discussing together, you must be chartists? I have no idea.

    As far as the article goes,Nadeem is great, he squashes a lot of different stuff into his articles with his babbling style.

    “What this means is that the Labour government whether by design or circumstances is embarked on a programme of severe currency devaluation the effect of which is to inflate UK assets in nominal terms including the housing market. The immediate effect of the currency crash is to mask the crash in UK house prices from the public, however going forward this will result in much higher inflation and therefore a stagnating housing market for many years.”

    Surely New Labour won’t try and mask the housing crash from the public ! I don’t believe it ! That makes it sound as though they want to cover up some disastrous policy decisions continued over a decade, when obviously they don’t have to because our future is golden !

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  • sold 2 rent 1 says:

    crunchy,

    I was aware of Biden’s forecast. Thanks.

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  • lierbag – you might do well to actually read the Armstrong writings, before rejecting things out of hand. s2r1 has posted the link. Even if its just so you have a few more subjects up your sleeve at the next dinner party you attend. 😉

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  • sold 2 rent 1 says:

    TM,

    It works on days
    Previous turning points are:

    2007.15 ==== 27 Feb 2007
    2008.225 === 23 March 2008

    It is an error.
    He is only human.

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  • sold 2 rent 1 says:

    Here is his article from 1999 (before prison)
    http://www.contrahour.com/contrahour/2006/06/martin_armstron.html

    IMHO the most important bit

    “There will be those who believe in the business cycle and use it to their advantage just as there will be those who refuse to acknowledge its existence. As long as not everyone believes, the cycle will exist forever.”

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  • sold 2 rent 1 says:

    Did a search on “martin armstrong march april 19 2009 error” in Google and this thread comes up.
    We may have been the first site to identify this error.

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  • It’s essentially withchcraft. Actually what interests me is why some people are drawn by such theories and other aren’t.

    I was reading (very briefly mind) how Vitamin B17 (think apple and apricot) stops cancer and there is all this quite plausible stuff backed up by conspiracy theories about big drug co’s. Then read the a bit of the actual studies and the evidence was so thin and seemed to turn on the seeds reacting to produce arsenic which killed cultured cancer cells – which of course it would.

    Mind you there is a conspiracy with car manufactures, becoming impossible to change even lights without going to a dealer.

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  • bellweather …. because they assist?

    Remember this:

    Re Euro / GBP – yes everyone thinks that and also that parity is a fait acompli (i remember years ago when the £ went to 1.05 USD and the world and his mate were predicting parity … which was of course never acheived). Im not saying that we wont have parity i just think nows the time to see if we have topping paterns. Of course you could argue that the rate differentials and / or where they go forward, are priced in. I am quite nervy re this and am going to hedge another 30% around here. (not an outright short – which will still leave me with 40% exposure – on a quite large cash Euro value). However i will at some point hedge the rest and / or short the Euro. I may have to have a couple of bites at the cherry (and take a sensible loss in the process) but i am convinced the falls cant go on forever. Well thats my view for what its worth…. December 30, 2008 12:41PM

    What happened next? I am thinking that this (since that post) is the final countertrend move before the top but it could be in.

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  • Hey I’m not dissin the charts even if I’m not motivated to learn about them – patterns are apparent if you follow price movements of anything.

    Was more referring to grander models that are not explicable rationally eg Callemans and Mayan Calanders – that said the last post from S2R1 is interesting.

    I don’t trade anything like a frequently as you so some of your ways of thinking don’t apply also more interested in individual stocks and value investing as a way to make long term.

    That said been expecting the Euro myth to break and switched into dollars on Friday on the back of the weakness relative to Sterling. Also moved more sterling into trading account as the current rather dramatic movements seem to be setting up a buying opportunity

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  • Fair enough Bellwether – i am not preaching. It just sounded like witchcraft was a bit provocative! Good luck with your positions. You are right personally i wouldnt buy and hold shares, but i have bought and held gold for a long time (years) and also Cash Euros. Im actually only in and out when it looks sensible (to me) to liquidate.

    As you know shorted USD @ 1.55 bought @ 1.45 (today 1.48) so in summary its all about 2 things – price and time. Thats sounds a bit Gann(ish),

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  • techieman (re: post 34) at least you seem to have an agreeable sense of humour. Personally, I distrust attempts to try to impose theoretical systems on world events, beyond those of immediately identifiable ’cause and effect’ of course, purely because they can’t account for random variables – such as earthquakes, political assassination or, seemingly, Peak Oil and gas (see: post 14).

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