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245: 2009 Prediction (and 2008 look-back)

12-29-2008 team predict property prices will drop for the whole of 2009 (in order of decrease):

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Unfortunately, the economic turmoil globally will lead to increase in tensions in the Middle East and South Asia. Oil prices dropping to $35/bbl mid Dec 2008 have been a trigger for this - plus less trade with western economies because of the financial turmoil and global slowdown. Less money in the Middle East and South Asia with regret is likely to feed through to increasing security issues.


In USA and UK - the effects of almost zero % interest rates, spread rates on mortgages reducing, oil prices staying relatively low and fiscal stimuli (infra-structure spending) and likely to see these economies kick-start by mid 2009. Meanwhile, higher Euro rates, hang-over from boom years and lack of fiscal stimuli will likely lead to severe recessions in Italy, Spain, Ireland, Portugal and Iceland and possibly Greece. France and Germany will likely come off better with Nordic countries like Norway and Sweden staying relatively stable.


But expect further period of turmoil in Q3 2009 as UK and US recovery is called into question. House prices should however start a mild bounce back after steep falls in first half of 2009, some time Sept 2009.


Property areas to avoid - Middle East, South Asia. Areas to consider purchase when bottom of market reached (as long as oil prices stay at or below $70/bbl) - USA (NE, California, Florida, Texas),  UK (south/London).


Look-Back on 2008 Predictions

Enclosed for good order is a look-back are our predictions from 17th Dec 2007 for the year 2008. We do this look-back every year – and we don’t want to shirk away from what we said. In the prior five years we had been remarkably accurate. Alas there were not many people that predicted outright recession and property prices collapsing.

Compared with the bulk of forecasters, we were pretty close on property pices (again) as you can see. Note a quote from David Smith's website (28 Dec 2008)  to give this a bit more substance.

"A year ago, just about the gloomiest forecast for house prices you could find among economists was for a fall of 5% in 2008. Data from the main lenders, Halifax and Nationwide, point to a fall about three times that, though the FT-Acadametrics index is down by a more modest 8%."

So compared with the well respected FT-Acadmatrics index, we were very close.

It was looking uncertain and rather bleak in December 2007, but we believe the sky-rocketing oil prices de-stabilized the global economy and sent us into recession. It may have happened anyway, but it sure didn’t help – with inflation rising to 4.7%, interest rates to 5.75% whilst financial turmoil spread like contagion from USA around the globe. predict property prices will drop (in order of decrease):

Overall, house prices dropped an additional 6% compared with our prediction over the full year. General regional trends were reasonably accurate. Note – there is a large difference in the range of reported house price drops – as high as 13+% and as low as zero in some areas of London.

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