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What 2013 has in store for house prices

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Take a look at three foorecasters's guesses for 2013 - and see how inaccurate their previous predictions have been!


Over the years, I've been building an ever-growing database showing dozens of forecasters and hundreds of forecasts.

I've measured Halifax's forecasts against its own house price statistics. Its latest figure for 2012 is up to November. For the other two forecasters featured here, I've used the Office for National Statistics' (ONS) figures. These figures are up to October 2012, so remember there are two months to go to see precisely how (in)accurate the forecasts were for this year.

For 2011 and previous years I used the full actual results.

Halifax

Halifax is forecasting that house prices will end 2013 between -2% and +2%.

How has this forecaster done previously?

Date forecast was made

Period of forecast

Forecast

Actual result

Nov 2006

Nov 2006 to Oct 2008

Lower growth (but still rising)

-10.6%

Oct 2010

2011

Little change

Little change (+2.3%)

Dec 2011

2012

+-2%

+2%

Jun 2012

Jun 2012 to end 2012

Around June's levels

Around June's levels (+1.4)

Dec 2012

2013

+-2%

?

Note that all the reasonably accurate forecasts in this table and the rest in my article are highlighted in bold. The rest are not accurate.

Halifax's forecast in November 2006, before the crash, was abysmal. Notice the gap after this forecast ending in 2008. Halifax chickened out during that period. However, since then it has predicted today's going-nowhere market very well.

Its forecast for 2012 is on track. If prices move nowhere in December, or don't rise much more, it will be very accurate again.

Hometrack

Hometrack is forecasting a fall of 1% in 2013.

Here's its forecasting record for previous years:

Date forecast was made

Period of forecast

Forecast

Actual result

September 2004

2005

0% change

+3.9%

Nov 2006

Nov 2006 to Oct 2008

“Very low growth” (but still rising)

Rapid growth (10.6%) followed by massive fall (-7.7%)

Nov 2007

2008

+1%

-10.6%

Nov 2007

End 2007 to end 2009

+3%

-8.3%

Dec 2010

2011

-2%

-0.9%

Oct 2011

Nov 2011 going into 2012

Modest falls to end year and likely going into 2012

-0.9% by end year, but rapid gain of 7% in early 2012.

Dec 2011

2012

-3%

+0.9%?

December 2012

2013

-1%

?

Hometrack can't claim to have a good record, with its guesses sometimes being wrong by more than 11 percentage points! It didn't get the direction right for 2012, although its preferred benchmark, the ONS, won't release final data for November and December until February 2013.

IHS Global Insight

Consultancy IHS Global Insight is forecasting that “house prices will stabilise” in 2013, but there will be no big turnaround.

Here's its previous forecasting record:

Date forecast was made

Period of forecast

Forecast

Actual result

June 2009

June 2009 to mid 2010

-10%

+10.5%

July 2010

July 2010 to start 2011

-3% to -5% by end 2010 and more losses start 2011

-1.9% by end 2010, but 3.9% gain in early 2011.

Jan 2011

Mid-2010 to end 2011

-10%

+1.4%

July 2010

2011

Falls

Falls (-0.9%)

Oct 2010

2011

-10%

-0.9%

Apr 2011

2011

-5%

-0.9%

Oct 2011

Oct 2011 to Mid 2012

-5%

+6.9%

Dec 2011

2012

-5%

+0.9%?

December 2012

2013

“House prices will stabilise” (no big turnaround)

?

This is a respected forecaster but, as you can see from the table, its guesses have been shockingly bad. Most forecasts have been wrong by 10 percentage points or more and the direction has frequently been wrong. The big one was a forecast of -10% over the year to mid 2010, when the actual result was +10.5%. That forecast was wrong by more than 20 percentage points!

I hope no one placed bets on or against the housing market based on that particular forecast.

You should also notice from that table that the forecaster, like most others, continually updated its forecasts. (Forecasters always “update”; they never just admit that they got it totally wrong.) Despite the updates being over increasingly shorter periods as it got closer to the end dates, the forecasts were still terrible.

Silent forecasters

The story continues throughout my database on a similar vein: wildly inaccurate forecasts. That said, forecasters have on average been more accurate in the past two years than normal; the market hasn't moved much and relatively few forecasters have been brave enough to suggest it would.

We're missing some prominent forecasters this year though. I'll mention two of them, because I think their absence is notable.

Economics advisory firm Capital Economics is possibly the most quoted and prominent forecaster over the past decade, often through its spokespeople Roger Bootle and Ed Stansfield. However, it's also been one of the most grossly inaccurate. This year, it appears – as far as I can see – to have finally given up making public forecasts. I can't find a 2013 forecast made by it in the past few months.

It has even banished its house price forecasts from its regular key forecasts statements, which show other predictions, such as economic growth. If you want to laugh at its house price predictions, it seems you now have to become a paying client!

Maybe, like Nationwide and Halifax did after the crash, it'll leave a gap of a year or so to help make people forget its past inaccuracies, before coming back on the scene again.

Stuart Law, another forecaster and CEO of property investment advisory Assetz, has made forecasts for the past five years. He's made some horrendous ones, although he's not done as badly for 2012 so far, where he's predicted a rise of 3%.

His own quoted measure, Nationwide house prices, is showing house prices at the end of November 2012 are within a few pounds of the end 2011 values, for no gain at all: 0% change.

After claiming at the end of August 2012 – just four months from the end of this year – that 3% was likely to be exceeded, he has gone quiet, perhaps while he writes his letter to Santa asking for a whopping price increase to make his forecast come true.

Please don't use these house-price forecasts to make – or support – your financial decisions.

More on property:
London housing market: why it's so different to the rest of the UK
Five mistakes that mean you'll get the wrong mortgage
How house prices changed around the world in 2012

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