What 2012 has in store for house prices

What do the forecasters think will happen to house prices in 2012? And how did they fare with their 2011 predictions?

It's the end of the year, so the property experts are again keen to predict just what will happen to house prices next year.

Below are some house-price forecasts for 2012, with just a snapshot of some of the forecasters' most recent record. Most of them have done reasonably well in 2011 and a few also did alright in 2010, but the further you go back – and my unique database of hundreds of forecasts which I have called upon for this article goes back some way – the more you realise how terrible and inconsistent forecasters can be.

In this article, I'm comparing previous forecasts with actual results using the Nationwide house price index. Perhaps another index would help one or more of our forecasters to achieve better results in some years, but that would likely be offset by worse results in others.

Assetz, property investors and developers

Note Assetz's December 2008 forecast of a 5% fall in 2009. Near the end of 2009, Assetz wrote in one press release: “Still likely to meet overall 2009 prediction of 5% annual growth in December.” Clearly some time during the year it did a complete u-turn on its original annual forecast. It forgot to mention that in its statement!

In November 2011 it forecast prices to rise by 3% in 2012.

Capital Economics, economic research consultancy

Capital Economics is notorious. It's one of the most quoted forecasters, yet it was predicting falls of up to 30% to occur in the early noughties and, as we know, house prices instead rose by double digits in most of those years.

Here's what happened next, starting with its November 2007 forecast for the whole of 2008:

For this article, I've done my best to use forecasts made a year or more before the forecast end date, where I have the data.

Some forecasters release more forecast “updates” (which the rest of us would sensibly call “corrections to inaccurate forecasts”) than others, and Capital Economics is one of them.

In summer 2010, for example, it corrected its -10% forecast for that whole year to -5%, yet even with just six months to target it was convincingly wrong. It made an identical summer correction to -5% for 2011 too.

For 2012, it's forecasting another fall of 5%. It has twice adjusted this forecast from an initial -10%.

CEBR, business consultancy

There are gaps from 2009 to 2010, because during this period the CEBR's central forecasts were not for full calendar years. However, glancing at those missing forecasts, they were also wildly wrong.

In August 2011 the CEBR corrected its forecast for the whole of 2011 to -1.6%. I'm not sure how useful an annual forecast is supposed to be with just four months of the year remaining but, then again, this article is already demonstrating that forecasts made a year in advance are unreliable too.

In November 2011, the consultancy forecast a rise of 1.6% for 2012. Or, rather, this was another “update” on a forecast from just two months previous! If the CEBR is right with its latest 2012 forecast then it will miss its four-year forecast from the beginning of 2009 to the end of 2012 by something like 20 percentage points, since it predicted a rise of around 30% from the bottom of the market over the period.

A few more forecasts

You've got the point by now, so here are just the summaries of a few more forecasts with the most recent history:

Ernst & Young ITEM Club

Having earlier forecast a “slow recovery” in 2012 Ernst & Young ITEM Club are now forecasting 5% falls.

Nationwide

Nationwide stopped forecasting for a while after failing to predict the crash and has since restarted by using vague descriptions. That's probably how I'd do it too, if I was told I had to.

Reuters' shrinking poll of economists

Reuters polled 32 economists some years ago, which has gradually shrunk to 23 in the latest forecast. The poll, too, didn't see the crash coming, but they're among the lucky winners in the past two years, being close enough to reality.

Make sure these stay just a bit of fun

A great many of you will guess whether house prices are too high or too low, and then make forecasts on what will happen next. Then you'll use them to make financial decisions that will have a massive impact on your future wealth.

I have explained why this wasn't a good idea and is in fact potentially very damaging in Why house price forecasts are dangerous. I also attempted to come up with a better way to decide when to buy your own home, so why not give it a try? It has to be better than relying on the experts!

More: compare mortgages through lovemoney.com | New way to stop your home sale falling through | How to spend less and have more