Tag Archives for " Property Experts "

wrong-house-price-predictions

Property experts – embarassing predictions, UK experts who got it wrong

Property experts – apologies to anyone working at the firms I’m highlighting, but you bring it on yourselves.

The companies below are considered some of the most reliable property experts in the UK.

Making expert predictions is a fool’s game. It’s not that the hundreds of people employed at these firms are fools, it ’s just that they don’t get to make predictions. In some cases, as you’ll see shortly, the predictions were so far out that they could have been pulled out of a hat from a bunch of hastily written guesses.

Let’s get started at examining the predictions of the great and the good in the property world.

In the following summaries, you’ll notice some years where there isn’t a prediction. This is because the expert didn’t give a clear percentage prediction that year.

Another point to note is that most of the experts are corporates rather than individuals, sure the individuals may claim to make them or be the face but they have a backroom of economists and professionals doing the analysis.

Let’s kick off with my personal predictions. I didn’t make one every year as I was focused on having two kids around the end of the year when I make my predictions. I don’t have a back room, just a computer and an intimate knowledge of the UK marketplace.

Brett Alegre-Wood – YPC Group

property-experts-ypc

Ernst & Young ITEM Club

The ITEM Club is sponsored by Ernst & Young, one of the world’s biggest auditing firms and the third largest professional services firm on the planet. The ITEM club is an independent forecasting group, and the only non-­governmental group to use the HM Treasury model of the UK economy to aid it in its work.

ITEM states that it is free from any political, economic, or business bias, though I’m guessing it gets permission to use government models from somewhere, and then, of course, there’s the sponsorship it receives from E&Y. Anyway, around 40 economists work on producing its forecasts, which include those for the property market.

Here’s how the ITEM Club did over the last few years:

property-experts-ernstyoung

Fortunately, the group seems to be improving with its forecasts, but it is worrying that some of its predictions are really way out, and in two of the five years it even got the wrong direction. I’m not sure if this says more about the Treasury’s economic model or the ability of 40 economists to interpret the evidence around them or simply the fact that predictions are incredibly difficult.

John Charcoal

John Charcoal is one of the biggest mortgage brokers in the UK, and in its marketing literature states, it is the UK’s leading independent mortgage and remortgage adviser; and they are good at what they do. Except, perhaps, when it comes to making property market forecasts, although its effort for 2014 was pretty close:

property-experts-charcoal

The good news is that John Charcoal got the market direction correct in every year, though it hedged its bets in 2011. However, if you had sat and forecast a tight range in every year, you’d have had a similar result, only going horribly wrong when the market moves a large amount: exactly the forecast that might be important to an investor.

IHS Global Insight

The IHS website says that it is the source for critical insight and information, the premier provider of global market, industry, and technical expertise. It says its “unique combination of information, analytics and expertise enable smarter, better decision making in everything from day-­to­‐day operations to long term investments.”  

Like most other firms, it does n’t make a percentage call every year. This is a good thing because if it did we’d be able to highlight how poor their previous predictions have been even without a percentage placed on them:

property-experts-IHS

Not a brilliant record, though a marked improvement in 2014.

Hometrack

Hometrack’s homepage on its website offers “unrivalled property expertise”, offering to “help you identify residential property risk, benchmark performance and save money.

Its website meta description states: “We are the property market experts”. I’ll let you make up your own mind:

property-experts-hometrack

All I have to add is “Oh dear!”

Centre for Economics and Business Research (CBER)

One thing you’ll notice when looking through the CBER’s guesses… sorry, predictions… is that it never predicts the market will move too much. With a strategy like that, its forecasts were bound to blow up at some time. So it proved in 2008 when it was miles out. So far in fact, that it refused to make a numbered prediction for two years.

Unsurprisingly, when the market is dull, the CBER’s predictions are not too far wide of the mark:

property-experts-CBER

If you’re thinking to yourself that the CBER doesn’t predict a fall, you’d almost be right. For 2015 it is predicting that UK house prices will fall by 1% the only forecaster that is plumping for a price decline over the calendar year.

Capital Economics

Billing itself as one of the leading independent macro-­economic research companies in the world, it supplies research to institutional and corporate clients around the world and is cited in the press a fair amount.

If you hold a property fund that invests in UK property, and that fund hasn’t done so well, you might be about to find out why:

property-experts-Capital

If Capital Economics had been correct with each of its forecasts going back to 2008, the average house price in the UK today would be around £99,500 – that’s some way off the actual average of around £183,000!

As you can see, expert house price predictions are patchy at best and would be disastrous to follow at their worst. Oh, and just in case you think this phenomenon is restricted to the UK market, take a look at this table that shows property market predictions in Canada over the last few years:

property-experts-canada

If we looked at every single developed property market in the world, we would see that experts are no good at making predictions.

Read the post Why we follow property experts (even though we shouldn’t) for more insight into the world of bad predictions.

Property Experts

Property Experts – Who are they really?

Look for age not properties,

I bet you all remember the joke definition of expert: "X is an unknown quantity and expert is a drip under pressure" - which means that an "expert" is an "unknown drip under pressure". James and I had lunch today at Hakkasan (a fabulous Michelin star Chinese restaurant) with one of our brokers and she told us the tale of a "property expert" who was now living overseas after his property company had fallen over in 2008. The story goes that he had acquired over 100 properties in a short space of time but foolishly failed to plan for rising interest, had fallen behind in payments and had not been able to maintain the portfolio. In the end, he was made bankrupt and moved overseas. Read More
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