Looking to 2010...

Graham_Devon

Just seen this on the BBC website, about where prices may go in 2010.

Amongst the genereal comments, such as the CML not actually giving a forecast as the market is too volitile, we have a range of opinions.

http://news.bbc.co.uk/1/hi/business/8386796.stm

Good article in my mind, pretty balanced. My thoughts are alongside the quote below (not sure on the percentages he claims though!) Well worth a read.

So what about 2010?

Will prices continue their upward path, slow down, or even fall again?
Jonathan Davis, of financial planning firm Armstrong Davis, is certain that the past year has simply been a false dawn.

"There has been an unprecedented level of government stimulus to the economy which has had a positive short-term effect - low interest rates, bank bail outs, the car scrappage scheme and the VAT cut," he says.

"Take away all that and there's nothing holding up the economy," he says.

Mr Davis is sure house prices will fall again this coming year by another 10%-15%, mainly in the second half.

"The general election, tax rises, government spending cuts and unemployment above three million - all this will mean a significant rise in repossessions, both residential and buy-to-let," he predicts.

Notably, the above quote is the only one to have looked at the stimulus and how the end of stimulus may have an effect. The rest don't seem to mention it, only take the positives from it without acknowledging how it was done?

nollag2006

Isn't Jonny boy the same guy from HPC.co.uk??

What happened to his prediction of drops of 50% drops from Sept 2008 level?

If the King of Bears is getting less pessimistic on the market, surely this augurs well for 2010!!

chucky

the question is how QE will be withdrawn.

many expect it to be done suddenly - it won't happen. it will kill the economy.
the tools that are planned to be used to remove QE from the economy will take years and to complete - it won't be a quick process.

it all depends on the BOE economic plan and how much pain is needed to be felt for it to work.

chucky

nollag2006 wrote: »

Isn't Jonny boy the same guy from HPC.co.uk??

What happened to his prediction of drops of 50% drops from Sept 2008 level?

If the King of Bears is getting less pessimistic on the market, surely this augurs well for 2010!!

he's just scare mongering and doing his job for Capital Economics - QE won't be removed as quickly as it was introduced.
he's trying to scare people that it will be removed over-night. it won't happen.

abaxas

chucky wrote: »

he's just scare mongering and doing his job for Capital Economics - QE won't be removed as quickly as it was introduced.
he's trying to scare people that it will be removed over-night. it won't happen.

But it does make for an interesting debate over the legallity of paying tax.

Maybe we no longer are required to.

nollag2006

Hi chucky

Interesting that CE are the only other jokers that are predicting a price fall for 2010. Weren't these the same guys that have been calling the top of the market since 2000 ? (Other than an embarrasing incident in mid 2007??)



As for QE being withdrawn, this is not feasible until the recent thaw in the lending market really gains speed. I've not heard any politician or economist recommend any form of rapid withdrawl.

Graham_Devon

chucky wrote: »

the question is how QE will be withdrawn.

many expect it to be done suddenly - it won't happen. it will kill the economy.
the tools that are planned to be used to remove QE from the economy will take years and to complete - it won't be a quick process.

it all depends on the BOE economic plan and how much pain is needed to be felt for it to work.

Agree, how they "pull" stimulus is the key.

However, I think ending it will be quite significant. And I mean stopping it, not paying it back, but saying X'bn is all there is, and there is no more.

It's not just QE though, it's everything else. We all know VAT needs to go to 20%, and was written into the budget, allbeit the PM overpowered due to an upcoming election, so I thik we need to factor that in as it's already been thought about.

It's the cuts that need to happen if we are going to stop living on debt as a country, and lets face it, that has to stop.

It's everything, that in my mind, faces us after an election when whoever is elected has to sort out not the economy, but the books.

But none of the predictions seem to even nod at the stimulus, i.e. whats actually keeping us afloat, apart from the one I quoted.

nollag2006

Graham_Devon wrote: »

Agree, how they "pull" stimulus is the key.

However, I think ending it will be quite significant. And I mean stopping it, not paying it back, but saying X'bn is all there is, and there is no more.

The latest BoE minutes are quite clear on QE - with only one of the 9 members recommeding any increase.

chucky

Graham_Devon wrote: »

Agree, how they "pull" stimulus is the key.

However, I think ending it will be quite significant. And I mean stopping it, not paying it back, but saying X'bn is all there is, and there is no more.

stopping it will jolt the equity markets more than anything, i can't see it affecting anything else. they seem to be the ones that have done best out of the new found liquidity for some reason.

personally, i don't think removing the amount in £££ of QE is ever going to be an issue. be it £100b or £200b - it's not really important, it will just take longer to remove. the required cuts in spending are a separate issue from QE, don't link them.
the bigger issue is what happens when the velocity of the circulation of cash when QE is stopped. can the markets work? it's a timing issue more than anything.

the tools they are looking at for the removal are reverse repos or holding gilts on deposit. whatever they decide on it has to be flexible to be able to be slightly reversed if the need arose to push liquidity back into the markets.

JP45

"No-one forecast the rise this year..."

Isn't this the key point. Given the inaccuracy of previous house price forecasts, isn't it about time we all faced up to the realisation that this is little more than guesswork.

The certainty with which some of these forecasts are made seems ludicrous.

Graham_Devon

JP45 wrote: »

Isn't this the key point. Given the inaccuracy of previous house price forecasts, isn't it about time we all faced up to the realisation that this is little more than guesswork.

The certainty with which some of these forecasts are made seems ludicrous.

Agree.

I'd argue that we are even less certain now of how the economy is really doing, than we were late 2008.

Late 2008, we knew we were in the !!!!!! and we knew how bad we were in it. Now, we don't really know, everythings a little skewed.

Not saying that the stimulus was a bad thing or I don't think it was needed, just saying I personally feel we know less about the economy now with it all shored up with stimulus, than we did when it was doing it's own thing and running down it's own path.

Therefore, it's even harder to look at the reality of the situation, so must be even harder to predict something based on that.