The crazy revelation from the pandemic that property prices have, for the first time, divorced themselves from one of the biggest economic recessions in our history, has meant that forecasters have had a pretty tough time over the last few years!
Here’s the forecasts for 2022, which are typically published the few months before or at the end of 2021:
Even at low rates, we typically thinking it’s a good forecast if it’s +/- 1% within the actuals.
Based on this measure, as you can see, the growth rates for Yorks and Humber and the North East aren’t bad so far.
With Yorks and Humber, Savills have done a good job, forecasting 4.5% and the actual is 4.2%. Hamptons didn’t do too badly with a 5% forecast versus 4.2%, and JLL are not far off the money at 3.5% with CEBR just missing out, forecasting a bit too high at 5.3%.
The North East also does well with Savills forecasting 4% versus 3.6%, JLL 3% vs 3.6% and CEBR predicting 3.9% growth.
In addition, we have CEBR doing a good job predicting 5.3% growth in the North West versus 6.2%.
Finally, JLL are the only ones that call London anywhere near close with a forecast of 6% versus 6.3% actual growth.
So overall, JLL, Savills and CEBR are topping the forecaster charts for these regions.
Some success by the forecasters though doesn’t make for overall good forecasts this year and the rest of the regional forecasts are way off base!
To be fair to them, we all thought the price growth we’d seen during the pandemic would run out of steam quite quickly this year – and it may still happen in the second half of the year. We’ll be able to check the forecast accuracy again a few months into the new year, and it may be that they will all be a bit more accurate by then.
The rationale for the forecasts for 2022 was that property price growth would ‘go back’ to the ‘normal annual price growth’ we’ve seen since 2005/2007, which are shown in the table below, where basically over time, property prices have been rising at 3-5%.
However, buyers continued to pay top rates for properties, especially as sellers are still in such short supply and so the forecasts which typically ranged between 3-5% price growth, are far off base with the Land Registry growth of 8-11% growth year on year for the rest of the regions.
The Land Registry actuals do need to come with a bit of a health warning as they are over exaggerating property price growth due to the mix of more houses being sold than flats, so price growth won’t be quite as high as they are currently recording for the half year when we come to do the comparison early next year. But having said that, the forecasts are so way off, it won’t influence the result.
And, the forecasters are so sure that the growth this year will be so much higher, both Knight Frank and Savills decided to re-run their forecasts and have revised them upwards.
In Savills’ case, not only have they revised them upwards quite substantially, but they have also published another set of new forecasts (although the changes don’t kick in until 2024). They are expecting the cost of living crisis to be over by then, and the reason for the new forecast is the expectation that property price inflation over the next five years will be higher due to dropping the mortgage stress test, which limited lending based on a ‘normal’ interest rate as opposed to the low ones that buyers are currently being charged.
Here are the latest, revised forecasts for 2022 and indeed for the next five years. Let’s hope they are more accurate than the ones so far this year
