‘Useless house price forecasts’: rubbishing the rubbisher

We wrote (from No Monkey Business Limited, as financial advisers who do make forecasts of house prices) to the Financial Times letters editor, as follows, in response to an article by economist John Kay rubbishing attempts to forecast house prices. The technical basis for forecasting house prices referred to in the letter, using regression analysis of long time series data for average prices deflated by general inflation, is not new to this site. It is not a perfect model but it makes a lot more sense than blindly assuming that house prices are somehow immune from laws affecting other asset prices.

US house prices: you thought we had a problem?

Reading my US professional body’s reports of conference proceedings I was struck by a piece from Robert Schiller, author of the book ‘Irrational Exuberance’ about the stockmarket bubble at the end of the 90’s. Speaking at a presentation in New York in February, he contrasted the bubble correction in stocks with the new irrational exuberance [...]

Buy-to-let: bets with the housekeeping

Last week I posted an item about the implications of unsustainable house prices for owner occupiers. Buy-to-let investors merit a special entry.

10% of the UK housing stock is accounted for by the privately-rented sector. The buy-to-let fashion has not increased this proportion – only facilitated a shift from some pretty tough landlords, private but very professional, to a lot of amateurs. About 75% of privately-rented homes are owned by individuals with fewer than 5 properties. They are effectively running a business inside their household finances. It’s now a bad business to be in. They are also likely to be the wrong people to be running it.

House prices: crash postponed or crash avoided?

The Nationwide House Price Index for the UK ‘average’ property reached £165,000 in June, was up another 0.8% in July and Nationwide have just announced the same increase for August. In real terms, adjusted by general inflation, the new level is 4% above the peak immediately preceding the dip in 2004/5 but it is too early to call either the bulls or the bears back then right. London dipped earlier and rallied more, tied intimately to the stockmarket and bonuses.

Why London house prices are on the move again

Calling an overvalued market is not like calling the top and it makes no difference whether the market is house prices or equities. The analogy with equities is particularly apposite today because there is little question that it is the City bonus boom that reignited London prices. London agent Lane Fox reports that nearly half the buyers of properties it sold in the last year worked in financial services. Add in the lawyers, who are also enjoying a feeding frenzy in mergers and acquisitions work, and the proportion rises to over half.