PropertyInvesting.net: Property Investment Special Reports

below is the look-back on our 2012 predictions for good order - with our comments in bold italics.

There were predicted end Dec 2011 be a number of criteria that will pull property prices one way or the other, which we outline below:

Positive Criteria for Property Prices in 2012

·         More competitive and abundant mortgages - though only slightly increasing  Yes

·         Effects of higher VAT, national insurance, petrol duty and tax on bonuses start to disappear – generally correct

·         Increase in private sector bonuses – stayed the same (did not rise)

·         Lack of house building – accurate, all time low building rates in last 70 years

·         Increasing population - accurate

·         Pent up demand from three years of low market activity – please needing to move accurate

·         Middle class British people/expats move back home due to economic hardship overseas – meanwhile immigration increases further – net immigration increases even further accurate

·         2012 Olympics London affect - accurate

·         Crossrail building in London – affects starting – difficult to identify

Negative Criteria for Property Prices in 2012

·         Increased unemployment through 2012  - unemployment stays broadly the same

·         Increasing inflation feeding through to higher costs – in H2 2012 this was the case, but inflation subsided in H2 2012

·         Higher oil prices and energy prices - feeding through to inflation and higher interest rates – yes in H2, but prices dropped back by end 2012

·         Public sector jobs losses continuing through 2012 and lower or freezes on public sector wages – public sector wages rose faster than private sector - wrong

·         High levels of deposit required – yes, correct, 20% for first time buyers

·         Low lending to salary multiples - yes

·         Heat oil, petrol, diesel adversely affects rural areas and house prices in remoter parts – yes, high energy prices causing recession in rural areas

Overall, we believe the positive factor more or less cancel out the negative factors and prices will remain fairly subdued and fluctuating around current levels through 2011 on an overall UK national level. However, we predict property prices in the more wealthy southern and London (west London in particular) areas will be stronger than in northern areas that are more exposed to public sector and manufacturing sector jobs losses and spending cuts.  Accurate

Property Price Predictions

1. London +5% (West London +7%)   close to spot on

2. SE England +2%  close to spot on

3. East Anglia +1%  close to spot on

4. Scotland +2.5%  close to spot on

5. SW England +1%  close to spot on

6. NW England -2%  close to spot on

7. Midlands -2%  close to spot on

8. Wales -3%  close to spot on

9. NE England -3% close to spot on

10. Northern Ireland -5%  close to spot on

Note: Because inflation is at ~4.5%, real terms property prices decline in all regions except London – however, mortgage debt levels drop in real terms.

Other criteria

·         US Dollar to the UK£ $1.54 / £1 – broadly similar through year - was $1.62 / £1. Pound was stronger than predicted

·         UK £ to the Euro £1 / 1.1 Euro  Was £1 / 1.22 Euro – pound was stronger

·         Oil price $105/bbl early 2012 rising to $140 by June 2012 then dropping back to $120 by year end – accurate in H1 but stayed at that level in H2 2012

·         UK Gas price 48p/therm – accurate, closed at 52p

·         UK Interest Rates – staying at 0.5% through 2012 – accurate, same

·         FT rising from 5300 to 5600 by end April then dropping back starting early May to 5000 by end 2012 – wrong, FT closed at ~5950

·         UK Inflation CPI rising from 4.2% to 5.8% by end 2012 – upward momentum – wrong, inflation was claimed to be ~2.5% (though real inflation is more like 5%)

·         UK GDP staying between 0% and 1% through 2012 (on quarterly annualized basis) - accurate

·         Security outlook – Iran and North Korea key hot-spots. Continued turmoil in Syria and continued sectarianism in Iraq – worsening – Iran was hotspot, North Korea less so (Syria was worse than expected)

·         Euro interest rate – staying at 1.5% through 2012 - yes

·         US Interest rates staying at or close to 0.5% through 2012 - yes

·         UK unemployment – rising slightly through 2012 – was flat

·         Wage inflation – staying at ~3.2% through 2012 in both private and public sectors – reasonably accurate, was a little lower at ~2.5%

·         GDP growth London 2%, North -0.5%, Midland 0.5%, Scotland 1%. Wales -1% - very accurate

·         GDP China 8%, GDP India 6%, GDP Africa 3%, Global GDP 2.5%, UK 0.5%, USA 1%, Euroland 1% - as a whole over 2012 – very accurate

·         Gold rising from $1525 to $2000, silver rising from $26 to $45 – precious metals did rise, but gold closed at $1650/ounce and silver $30/ounce

·         Obama re-elected President by end 2012 with very small margin – correctly predicted

Iran and North Korea developing nuclear weapons capability continue to be key issues – lack of global leadership not helping resolve. Terrorism threats increases along with inflation and oil prices as economic disparity increases between population groups in Middle East. Security situation Middle East deteriorates with frequent disruptions and fears over oil supplies. Possible war between Israel and Iran (possibly also involving Syria, Egypt and/or Turkey). Focus on Straits of Hormuz – potential next oil crisis due possible blockade by Iran.   Generally correct.

USA debt situation deteriorates still further and QE3 accelerates in lead up to elections. Dollar declines as the Obama administration continues to print money devalues the currency and causes bond rates to rise sharply.  Accurate.

Inflation situation deteriorates by end 2012 – UK official RPI inflation figures rise above 5.5% with little response from central bank. Actual (real) inflation more like 10+%. All commodities prices rise - oil, gas, copper, sugar, wood prices. Oil production continues on a bumpy Peak Oil plateau – oil shortages worsen. Over-estimated inflation.

Greece, Portugal, Ireland, Spain and Italy continue economic crisis as stagflation is exacerbated by high oil prices (oil import costs). Further Euro debt contagion and bail-outs for Italy, Portugal, Greece and Spain as oil prices rise >$115/bbl. These countries need to leave the Euro to devalue their currencies and regain competitiveness – uncertain whether this happens in 2012 or not. France and Germany continue to drive the European economies through manufacturing and commerce expertise – peripheral Euro-zone countries suffer as the Euro stays strong. Norway and Sweden will continue to excel. Norway with its huge budget surplus, high performing sovereign wealth fund and high transparency and environmental standards. Fairly accurate.

As oil prices continue to rise, Dubai/UAE and Middle Eastern economies continue to grow strongly. China continues it’s boom with GDP 8% though slowing as real estate bubble deflates. Brazil and India also boom with GDP at 7% and 6.5% respectively. Accurate.

General Decline With Election Boost: In general, we should expect more of the same. That is, a slow economic decline – part of an overall collapse in western living standards as the ravages of Peak Oil and over-indebtedness lead to many years of economic decline. Government numbers will be manipulated to give an impression of growth, but inflation, low wage rises and rapidly increasing costs of food and energy will sap more life out of the consumer and make almost everyone feel hard up and financially pressured. It will be like 2011 except a bit worse. Expect more civil disorder, more global riots, higher unemployment, an increase in resources wars and increase in the impact of natural disasters. The growth economies of China and India will also slow somewhat. Because there are so many elections in western developed nations in 2012 (e.g. USA, France, Greece, Italy), expect massive money printing and further stimulation from low interest rates (negative real rates) – that store problems up for 2013, when a more general collapse will likely occur. Hence stock markets are likely to rise through to June 2012, before heading south as a broadening of the western economic breaks out by early 2013. Any big military conflict could see gold reclaim its rightful status as safe heaven away from the dollar - this should be in terminal decline by now.  Accurate.

Note: Sometime in the next 6 month to 6 years we expect a real economic-financial crisis in western developed nations caused by the US bond market meltdown. At this time, gold and silver prices will go ballistic (silver from $26/oz to $400/oz and gold from $1550/oz to about $6400/oz. The Dow Jones will be range bound – but will continue its steady decline in inflation adjusted terms. At some time in the future the Dow should equal the gold prices.  Still holding to this prediction moving forwards.

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