We are beginning to see the end of year-ish reading of the runes for the housing market result in a series of forecasts for price movements in 2011.
On balance the forecasts point to a drop, mainly on the back of fears over unemployment rising along with concerns among some economists about the start of rising interest rates in the year.
Here is a selected list of recent forecasts listed from the more bullish to more bearish, with their last year punts for 2010 in brackets.
- CEBR (for Chesterton Humberts): 1% rise (2 – 4% rise)
- Cluttons: Broadly flat (1 – 2% fall)
- Jones Lang LaSalle: 1% fall (7% fall)
- RICS: 2% fall (1 – 2 % rise)
- Hometrack: 2% fall (1% fall)
- OBR 3% fall (Treasury assumption: Broadly flat)
- Item Club: 3% fall (2% fall)
- Oxford Economics: 3% fall (2% fall)
- Savills: 3% fall (6 – 7% fall)
- Rightmove: 5% fall (Flat)
- Future HPI (formerly Tradition Future HPI): 8% fall (5% rise)
- Capital Economics: 10% fall (10% fall)
But these are just forecasts based on what you can sensibly see from today. The forecasters can’t possibly predict the actions of every policy maker, even if they can predict within reasonable limits the vagaries of the market. They can at best have a good stab at what policy makers might or should do when faced with the tough choices they will inevitably encounter over the coming year.
It is worth also remembering that there are a plethora of indexes which will come out with a range of outcomes, so it is best treating these forecasts as broad indicators of possible outcomes.
And it must be said when we look back at last year’s forecasts, they were pretty evenly spread for falls and rises with most pundits sitting within a range that could be described as “flat, give or take a bit”.
When taken as a whole they were pretty much in line with what appears to have happened.
The Treasury handily keeps an update of forecasts for the economy and the rough average of the latest batch of house price forecasts comes in at about a 2% fall. The average last year for 2010 was for a 1% rise.
For the record I am giving no prizes to those who end up closest to their predictions. In a world filled with so many random factors what sensible person would expect a forecast to be “accurate”.
In my experience a forecaster that ends up spot on is as likely to have done so for a set of reasons they didn’t foresee as for those that they did, however smuggly they might argue the case otherwise.
Frankly any of the above outcomes is reasonably possible, given the level of uncertainty in the economy.
In my view the value of a forecast is more in the thinking and the assumptions than in the final figure they plump for.