It is the time of year when everyone has predictions for the year ahead, especially when it comes to the fluctuating property market. But the director of Tutis Estates in Holbrooks, Jag Chaggar, suggests that ‘you should ignore them all’.
Rightmove reported a strong start to January, with asking prices rising by 1.3% and a 20% increase in the number of sales agreed compared to last year. Jag says that the market isn’t ‘back to normal’ but buyer confidence is on the rise.
There have also been various lenders from TSB, Skipton, and Santander cutting their rates. Popular investor lender The Mortgage Works has some eye-catching new rates, including two-year fixes below four percent– although it’s worth noting that fees are still much higher than they were a couple of years ago.
Read more: Why landlords should conduct routine inspections according to a property expert
In addition, estate agents Knight Frank believed property prices would decrease by 4 percent this year. But due to the recent cuts in mortgage rates, they now anticipate a 3% increase.
Turning points
Forecasts are only valuable when they can identify significant shifts in the market before, they happen. What difference does it make if prices increase by 2% or decrease by 3% in the next year?
For an investor who is investing for the long term, it will not matter. However, what if the market is about to soar or collapse? It would be beneficial to be aware of that beforehand.
However, forecasters have a dismal history of doing this. Consider the year 2007, just before a 15% market collapse, one analyst (Capital Economics) who had been predicting a crash for four years retracted this forecast in 2007, stating that “you can’t keep saying a crash will happen while prices keep on rising”.
Then came 2020, when a market that had been stagnant began to boom and prices increased by 7.3%. That knowledge would have been beneficial to have beforehand. However, Savills (among many others) predicted a 5–10% drop in prices.
False confidence
The other issue with predictions is that you can find data to support any point you want to make. So, if you look around, you will find lots of seemingly credible people making detailed, data-backed arguments… that entirely contradict one another.
Who are you going to believe? Can you have conviction in any view? So by all means absorb other people’s predictions – but only as one of many data points to help develop your own beliefs, not to blindly follow.
If you see someone making a confident and eye-catching forecast… have a quick Google of what they said at the same time last year. You might find that their track record is less than convincing.
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