Who got their predictions right for 2014? And what do they reckon will happen in 2015?
House prices are up by 7.2% over the last 12 months according to Nationwide. Let's take a look at some respected house price forecasters have performed, and what they're predicting for next year.
Capital Economics
|
Year |
Forecast |
Actual |
Difference (in percentage points) |
|
2008 |
-3% |
-15.9% |
12.9 |
|
2009 |
-20% |
+5.9% |
25.9 |
|
2010 |
-10% |
+0.1% |
10.1 |
|
2011 |
-10% |
+1% |
11 |
|
2012 |
-5% |
-1% |
4 |
|
2013 |
-5% |
+8.4% |
13.4 |
|
2014 |
+5% |
+7.2% |
2.2 |
|
2015 |
+6.5% |
-- |
-- |
This economics research company is often cited in the press. Capital Economics has got the direction wrong in four years out of seven years. Five years out of seven its forecast was wrong by over ten percentage points.
It's prediction for 2014 has been pretty good though.
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Centre for Economics and Business Research
|
Year |
Forecast |
Actual |
Difference (in percentage points) |
|
2007 |
+7.6% |
+4.8% |
2.8 |
|
2008 |
+1.5% |
-15.9% |
17.4 |
|
2011 |
+2.2% |
+1% |
1.2 |
|
2012 |
+1.6% |
-1% |
2.6 |
|
2014 |
+3.9% |
+7.2% |
3.3 |
|
2015 |
-0.8% |
-- |
-- |
The CEBR is rather patchy when it comes to making bold, straightforward predictions, so there are a few gaps. For example, for 2013 it just said that prices would fall or be flat for the first half and then start climbing. That wasn't particularly accurate.
And after a bad prediction for 2008, it bolted doors for two years to regroup and, perhaps, distance itself from its record. It wasn't the only company to do this.
For the most part, though, the CEBR's straightforward predictions have been fairly near the mark.
Will its suggested fall of nearly 1% in 2005 be the winning forecast?
Ernst & Young ITEM Club
|
Year |
Forecast |
Actual |
Difference (in percentage points) |
|
2009 |
-10% |
+5.9% |
15.9 |
|
2010 |
-5% |
+0.1% |
5.1 |
|
2012 |
-5% |
-1% |
4 |
|
2013 |
+4.4% |
+8.4% |
4 |
|
2014 |
+6.6% |
+7.2% |
0.6 |
|
2015 |
+7.4% |
-- |
-- |
This record doesn't look so bad, but you also need to consider that, at the extreme times when you need forecasts most, Ernst & Young got it terribly wrong.
Again, there are a few gaps, because the economic analyst group made no clear percentage forecasts in those years.
However, at the end of 2007 it did say: “It is unlikely that there will be a major housing recession." Then prices started crashing. And in October 2010 it said prices would fall 5% from recent peaks, which also didn't come to pass.
Hometrack
|
Year |
Forecast |
Actual |
Difference (in percentage points) |
|
2008 |
+1% |
-15.9% |
16.9 |
|
2009 |
-12% |
+5.9% |
17.9 |
|
2010 |
-1% |
+0.1% |
1.1 |
|
2011 |
-2% |
+1% |
3 |
|
2012 |
-3% |
-1% |
2 |
|
2013 |
-1% |
+8.4% |
9.4 |
|
2015 |
+2% |
-- |
-- |
We couldn't pin Hometrack down to a forecast in 2014 although in September 2013 it did say it expected prices to keep rising “in the short term”, which proved correct.
If we graciously include that forecast, Hometrack called the right direction for the property market a whole two times out of seven. Its forecasts have been wrong by 9.4 percentage points or more three times out of seven.
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IHS Global Insight
|
Year |
Forecast |
Actual |
Difference (in percentage points) |
|
2011 |
-10% |
+1% |
11 |
|
2012 |
-5% |
-1% |
4 |
|
2014 |
+8% |
+7.2% |
0.8 |
|
2015 |
+5% |
-- |
-- |
This business consultancy group also made four dreadful forecasts in the four years before 2011, covering the property price collapse and following period, but these weren't clear percentage forecasts for the calendar years, so they don't fit in our tables.
For 2013 it said it thought house prices would stabilise and there'd be “no big turnaround”, although they rose sharply at 8.4%.
Overall, another poor record, but it did well in 2014.
John Charcol
|
Year |
Forecast |
Actual |
Difference (in percentage points) |
|
2008 |
-2% |
-15.9% |
13.9 |
|
2010 |
+4% |
+0.1% |
3.9 |
|
2011 |
+-2% |
+1% |
1-3 |
|
2012 |
-4% |
-1% |
3 |
|
2014 |
+8% |
+7.2% |
0.8 |
|
2015 |
|
-- |
-- |
As you'll note in terms of 2011 and the absence of 2013, John Charcol also avoids calendar year forecasts in some years.
[SPOTLIGHT]In the other years where it has made precise forecasts, it has been very close. Notice it also got the direction right most years. It also called 2014 pretty well.
If I was a statistician, however, I would tell you that this short record is not enough to read into its reliability. You could easily achieve this record by chance, especially if you sensibly tend to forecast little change in most years. It just goes very wrong in big crashes and booms.
Which one can we trust most?
One economist , J. K. Galbraith, once said that the purpose of economic forecasters is to make astrology look respectable.
That's why the key question to me is not: "Where will house prices be in 12 months?" but instead: "Why do these companies keep trying to guess?"
Can you do better than the experts? What do you think will happen to house prices in 2015? Let us know in the comments box below.
*8.5% increase up to the end of November, the most recent figures at the time of writing
More on property:
2014's house price winners and losers