HTB: "Well timed and targeted" says ITEM, "little risk of bubble"

HAMISH_MCTAVISH

An old-fashioned housing market bounce will drive Britain back to economic health, one of the country’s leading forecasters has predicted.

Describing the Government’s controversial Help to Buy subsidised mortgage scheme as “well-timed and targeted”, the EY ITEM Club said there was little risk of a housing bubble and that recovering prices would boost spending and drive GDP growth.

Increasing prices will encourage builders to step up construction rates while an expected surge in transactions will boost spending on conveyancing and household goods as families kit out their new homes.

“The UK’s short-term growth will continue to be fuelled by the consumer. The recovery of the housing market, combined with falling unemployment, rising real incomes and improving confidence levels, will help to keep the tills ringing on the high street.”

ITEM has predicted a 3.5pc rise in house prices this year, 6.6pc in 2014 and 6.7pc in 2015. Those rises will “support consumer spending through confidence and wealth effects”, it said.

At the same time, housing transactions are expected to rise 11.9pc this year to “well over a million”, which will have an impact on “sales of white goods and furniture” as families furnish their homes.

Largely on the back of the housing recovery, ITEM has raised its GDP growth forecast for this year from 1.1pc to 1.4pc and from 2.2pc to 2.4pc for 2014. It expects growth of 2.6pc in 2015.

More praise for Help to Buy from top economists there.

The housing market is, quite rightly, a vital part of the economy in every developed country.

While of course there's a lot more to the economy than just buying and selling houses, (and associated services/products), it was never going to be the case that the 80%+ of economic activity not associated with housing could possibly grow enough to compensate for a crippled housing market.

Only now, with a proper housing recovery ongoing, can the UK's economic recovery be sustainable and widespread.

As for real incomes and 'bubble fears'.....

While consumer spending will drive the recovery, real disposable incomes this year are forecast to rise by just 0.2pc. As a result, households will save less.

Peter Spencer, the chief economic adviser to ITEM, was sanguine about the housing recovery and claimed the drop in the savings rate was not a great concern.

“Despite the recent criticism of [Help to Buy], the chances of seeing another housing market bubble are extremely slim,” he said.

“Household finances are also in much better shape, with debt to income ratios now at sustainable levels.”

Good to know.

Also interesting to see ITEM confirm what many of us have been saying for some time.

ITEM said the lack of high loan-to-value mortgage finances had cut a swathe of first-time buyers out of the market, and that the scheme would help fix the problem.

“Buy to let and other cash-rich buyers have had the market to themselves until this year, but Help to Buy will help level the playing field for first-time buyers and low equity households,” ITEM said.

http://www.telegraph.co.uk/finance/economics/10375385/Boost-for-Chancellor-as-housing-market-set-to-drive-economy.html

Loughton_Monkey

HAMISH_MCTAVISH wrote: »

.....Also interesting to see ITEM confirm what many of us have been saying for some time.

Seems they have also been waxing lyrical about North/South divide.

Data from the EY Item Club’s latest report shows that the divide exists even when the numbers are positive. The Item Club’s house price index shows that London homes will increase in value by 7pc year-on-year, followed interestingly by Wales, at just under 4pc.

But the North West, Yorkshire, and the North East, will all see price growth of around just 1pc.

Numbers from high-end estate agents Savills back up such regional disparities. The firm said in the late summer that it expects UK house price growth to average 18.1pc by the end of 2017, compared with the 11.5pc anticipated when its forecasts were originally published in November 2012. However, it stressed regional variations will fluctuate from 25.1pc for prime central London to 12.5pc for the North East.

Full article here:

http://www.telegraph.co.uk/finance/economics/10375057/UKs-economic-growth-masks-north-south-divide.html

And also the full Saville's research here:

http://www.savills.co.uk/_news/newsitem.aspx?intSitePageId=0&intNewsSitePageId=169338-0

Far from a bubble! They are now saying that house prices will 'broadly keep pace with inflation'.

The firm now expects UK house prices to average 18.1 per cent growth by the end of 2017, compared to the 11.5 per cent anticipated when its forecasts were originally published in November 2012. This means that house prices will broadly keep pace with inflation over this period rather than falling in real terms.

So nothing particularly scary. Just confirming that recovery is on the way. Don't panic.

Can't wait for the sun to go down over the yardarm so I can celebrate.

HAMISH_MCTAVISH

Loughton_Monkey wrote: »

So nothing particularly scary. Just confirming that recovery is on the way. Don't panic.

Indeed.

Can't wait for the sun to go down over the yardarm so I can celebrate.

Well, as Mrs McTavish always says, "It's after 6pm somewhere...".

:beer:

HAMISH_MCTAVISH

ITEM has predicted a 3.5pc rise in house prices this year, 6.6pc in 2014 and 6.7pc in 2015. Those rises will “support consumer spending through confidence and wealth effects”, it said.

At the same time, housing transactions are expected to rise 11.9pc this year to “well over a million”, which will have an impact on “sales of white goods and furniture” as families furnish their homes.

Largely on the back of the housing recovery, ITEM has raised its GDP growth forecast for this year from 1.1pc to 1.4pc and from 2.2pc to 2.4pc for 2014. It expects growth of 2.6pc in 2015

The virtuous cycle of economic growth is resuming.

Unemployment is falling.

Next will come real terms income increases.

It really is all over for the doomers....

the_flying_pig

HAMISH_MCTAVISH wrote: »

More praise for Help to Buy from top economists...

Shut up. Please.

HAMISH_MCTAVISH

the_flying_pig wrote: »

Shut up. Please.

Heh heh.....

Describing the Government’s controversial Help to Buy subsidised mortgage scheme as “well-timed and targeted”, the EY ITEM Club said there was little risk of a housing bubble and that recovering prices would boost spending and drive GDP growth.

Ernst and Young ITEM Club, very highly regarded economic forecasters and analysts, pretty much demolishing all the arguments the doom-mongers have been spouting over HTB.

The tide is very much turning.....:beer:

Graham_Devon

HAMISH_MCTAVISH wrote: »

Ernst and Young ITEM Club, very highly regarded economic forecasters and analysts, pretty much demolishing all the arguments the doom-mongers have been spouting over HTB.

They are just a bunch of economists Hamish. Economists which have got it wrong many many times.

In 2007, regarding the credit crunch, the same forecasters and analysts stated:

The credit crunch is also expected to raise the interest rates that banks offer to mortgage customers, but the Item Club does not expect that to lead to a serious correction in house prices.

http://news.bbc.co.uk/1/hi/business/7055111.stm

They got both items wrong by some magnitude. In their report, they forecasted growth for 2008 of 2.1%. This was a report in 2007, AFTER the credit crunch, hence why they refer to it.

As I say, they are just forecasters. Forecasters whom are caught out time and time again like all the others. However, in this case, they even knew about the credit crunch, but were wildly optimistic about how hard it would hit.....hence notching down their growth forecast by just 0.4%.

All I'm saying here, is, quite clearly, as the evidence above shows, they get things wrong. And in the case above, by quite a magnitude. So should we really believe them this time? Hindsight is a wonderful thing and I'm able to use it here, but hell, they knew about the credit crunch when they said all that above.

Up to you, but overwhelming evidence suggests when you interfere with markets, you find it difficult to control.

HAMISH_MCTAVISH

Graham_Devon wrote: »

Forecasters whom are caught out time and time again like all the others.

Like the others you quoted who were against HTB you mean?;)

I see.....:)

Graham_Devon

HAMISH_MCTAVISH wrote: »

Like the others you quoted who were against HTB you mean?;)

I see.....:)

Yer, sure. But if you put all those for and against HTB into two baskets, the basket for "against" would be overflowing.

Hence why you write a thread every time you find a rare nugget from someone or a group backing HTB up.

My point, which you appear to have ignored, referenced how you were holding them up as some kind of messiah group who had just proved everyone wrong. They are not, as my posts looking at their previous predictions suggests. They would have struggled to come up with a prediction any further from reality.

HAMISH_MCTAVISH

Graham_Devon wrote: »

Y referenced how you were holding them up as some kind of messiah group .

Nice strawman.

I never said they were the messiah.

Just very well respected economic forecasters and analysts.

Which they are.

And not even you can disagree with that.

Hence why your attempt to muddle the issue with 5 year old press releases.

Graham_Devon

For pities sake Hamish.

Its not muddling. You said they were respected and pretty much demolished all arguments. I have suggested they have got predictions wrong in the past, and wrong by quite a margin.

That's not muddling. It's factual. The "your muddling" is what you come up with every time you don't like something stated, especially if it's based on evidence.

If you only wanted replies from certain posters agreeing with and not challenging you, then pardon me.