Why UK House Prices Will Continue Rising - 'It's Immigration Stupid'
Housing-Market / UK Housing Aug 08, 2014 - 06:16 AM GMTBy: Nadeem_Walayat
The latest data from the Halifax puts average UK house prices at £189,726 (NSA) up £18,662 since the start of this year, which is resulting in a huge boost to home owner consumer confidence as house prices are now rising at a rate that is more than average monthly earnings which is strongly favourable for the Conservative party should the trend be sustained into the May 2015 General Election as election wins have always been a case of the 'it's the economy stupid' or more accurately put 'it's the housing market stupid'.
Average UK house prices are currently increasing at the rate of £2,665 per month which exceeds average UK gross earnings of just £2,300 per month. Whilst if this were just a one month blip then it would be soon forgotten, instead what we are witnessing is a sustained trend as of February 2014 with strengthening momentum of +10% per annum house price inflation as illustrated by the below graph with no sign of momentum slowing let alone a reduction in the £'s per month increase in house prices that looks set to in large part be sustained into the next general election, resulting in Conservative election boosting prospects that are NOT being reflected in the opinion polls.
My analysis of a year ago pointed out the critical importance that momentum plays in respect of ALL market trends, something that academics will NEVER understand because they have no market exposure to condition their perception of what is most probable but instead rely on ivory tower theories of what should happen.
19 Aug 2013 - UK House Prices Bull Market Soaring Momentum
What Academics and Journalists Will Never Understand About Markets
In having immersed by myself in the markets for 30 years now, I know that what many academics tend to take for granted rarely matches reality. Whilst I covered many aspects of trading markets in my last ebook (Stocks Stealth Bull Market 2013 and Beyond - Free Download). However in terms of economic trends what academics will always fail to grasp is that markets are NOT driven by fundamentals but by SENTIMENT and it is SENTIMENT that CREATES the fundamentals! Which is why the academic economists rarely have any real clue as to what is going in the markets because they are nearly always looking in the WRONG direction i.e. they are looking at the CAUSE rather than the EFFECT, as in reality it is the EFFECT that makes itself manifest in the price charts long before the CAUSE appears in the economic data that academics focus upon, which is why the SAME economic data can and is used by economists and pseudo-economist (journalists) such as that which we see on TV news shows to explain EITHER price rises OR falls.
You can only know the markets IF you TRADE the markets! The pseudo and academics economists will never get you on the right side of trends years ahead of the herd, in fact most press media commentators will be some of the LAST people to jump onboard trends, usually just before they end!
Momentum Drives Housing Market Sentiment and Economic Growth
As house price rises continue to accelerate, many people sat on the sidelines waiting for prices to fall or even crash will realise that it is just not going to happen, and in their despair at the relentless accelerating trend of rising prices, in increasing numbers will feel no choice but to jump onboard the housing bull market as a they see the houses they have been viewing sold and asking prices trending ever higher.
As house prices rise, home owners see the value of their houses rise £x thousands per month, in many cases by more than their salaries, this will encourage many to borrow and spend more, and save less which will meet the governments primary objective for inflating the economy by means of the housing market. Everyone will be playing the game of how much has my house value increased by, a quick analysis of my own housing portfolio (based in Zoopla estimates) shows a 5.5% increase in housing wealth over just the past 6 months! Does this make me feel richer, more willing to spend? Well, being only human, YES it does!
UK House Prices 5 Year Forecast
It is now over 7 months since excerpted analysis and the concluding 5 year trend forecast from the then forthcoming UK Housing Market ebook was published as excerpted below-
UK House Prices Forecast 2014 to 2018 - Conclusion
This forecast is based on the non seasonally adjusted Halifax House prices index that I have been tracking for over 25 years. The current house prices index for November 2013 is 174,671, with the starting point for the house prices forecast being my interim forecast as of July 2013 and its existing trend forecast into Mid 2014 of 187,000. Therefore this house prices forecast seeks to extend the existing forecast from Mid 2014 into the end of 2018 i.e. for 5 full years forward.
My concluding UK house prices forecast is for the Halifax NSA house prices index to target a trend to an average price of £270,600 by the end of 2018 which represents a 55% price rise on the most recent Halifax house prices data £174,671, that will make the the great bear market of 2008-2009 appear as a mere blip on the charts as the following forecast trend trajectory chart illustrates:
Additionally, a video version of excerpts of the forecast was posted during early January 2014 -
Current State of the UK House Prices Forecast
The updated halifax average house prices (NSA) graph to July 2014 at £189,726 which is set against the forecast index level for July 2014 of £188,244 that illustrates house prices over the past 7 months have shown <1% deviation from the forecast trend and therefore the long-term trend forecast remains on track to achieve a 55% rise in average house prices by the end of 2018.
My article during June concluded that house prices momentum was expected to continue to accelerate over the summer months and therefore to result in a slightly above forecast trend trajectory which is coming to pass with UK house prices not expected to deviate much further beyond +1% from forecast before converging towards forecast trend as I continue to expect house prices to OSCILATE around the forecast trend., therefore implying a slowdown towards trend -1%.
Immigration Driving UK House Prices
At the core of why UK house prices are set to continue to rise despite lack of affordability is lack of supply of new builds. Britain builds only approx HALF the number of houses needed just to meet NEW demand which is basically as a continuing consequences of out of control immigration and resulting population explosion that will continue for at least another decade!
My long standing forecast is for the UK population to grow from 62.2 million as of Mid 2010 to at least 70.5 million by 2030 as illustrated below:
UK Population Growth and Immigration Trend Forecast 2010 to 2030)
The assumptions being factored into the UK population growth forecast are for a natural UK population growth rate of births exceeding deaths of 0.33% per year (current 200k), coupled with net average current immigration trend of 240k per year, supplemented with climate change refugees averaging 50k per year from 2015 onwards extrapolates into the following trend forecast over the next 10 years that targets a rise from 62.2 million as of mid 2010 to 67 million by mid 2020, and should the same trend be maintained beyond 2020 then the UK population could rise to above 72 million by mid 2030. However in all probability the country will not experience the post 2020 trend due to several converging factors including political pressures, capacity constraints and the UK's relegation in the economic prosperity leagues. Which implies a tapering off of net immigration in favour of natural growth which implies a lower total of nearer 70.5 million by 2030 as illustrated by the below graph.
However, the updated graph shows an actual trend trajectory as per recent ONS population data of into Mid 2012 of 63.7 million and an estimate of into Mid 2013 of 64.3 million which suggests that the UK population could increase by an additional 4 million by 2030 as a consequence of what amounts to out of control immigration and its birth rate consequences that translates into a population increase equivalent to 15 cities the size of Birmingham.
Who is the blame for Britians immigration housing crisis ?
LABOUR!
It cannot be under stated how disastrous were the immigration policies of the last Labour government and their ineptitude in gauging the consequences in terms of opening the flood gates at a time when many other more competent european governments of such as Germany and France restricted immigration that acted as a funnel that sucked in 2 million eastern european immigrants into Britain's debt fuelled economic boom that has resulted in what amounts to catastrophic out of control immigration that is more than 20 TIMES that which Labour expected would take place, policies that as a consequence of being a part of the EU are STILL contributing towards out of control mass immigration that even former senior Labour Government Ministers such as former Foreign Secretary Jack Straw are stating were catastrophic:
" The predictions were completely catastrophic, I mean they were wrong by a factor of ten, in other words it wasn't 13,000 per year but it was something like 130,000 a year" - Jack Straw
The actual rate of annual immigration was 240,000, near 20 times the Labour governments propaganda that continued for many years into Mid 2000's despite clear evidence of mass immigration being under way.
So in my opinion the only thing that will bring what amounts to an exponential rise in UK house prices to a halt is REAL IMMIGRATION CONTROLS, which neither of the three mainstream parties will ever actually implement.
For in-depth explanations for why UK house prices are rising see the UK Housing Market Ebook (FREE DOWNLOAD).
The bottom line where house prices is concerned is 'its immigration stupid'
Implications for UK General Election Forecast
My longstanding forecast for the outcome of the next general election is as excerpted below -
30 Dec 2013 - UK House Prices Forecast 2014 to 2018, Inflation, Trend Trajectory and General Election 2015
In conclusion a May 2015 general election at an average house price inflation rate of 8.5% would result in a Conservative overall majority of at least 30 seats. Therefore this is my minimum expectation as I expect UK house prices to start to average 10% per annum from early 2014 with my actual forecast converging towards average UK house prices breaking to a new all time high just prior to the May 2015 general election which would be a significant boost for housing market sentiment and thus the Conservative's election prospects.
The updated election forecast graph shows that contrary to recent opinion polls (ComRes, ICM, Ipsos MORI and YouGov weighted average) that still erroneously put the Labour party ahead of the Tories on 34% for Labour against 31% for Conservative, instead the Tories have already achieved mission accomplished and are heading for an outright election victory well ahead of the forecast time table, never mind the prospects for another Coalition government which now appear to be extremely improbable.
In terms of the Scottish Independence Referendum the stealth Tory lead that is still NOT apparent in the opinion polls is a goldilocks situation for the Union for a Tory poll lead in the run up to the referendum would encourage more Scots to vote YES whilst a Labour poll lead would encourage more Scots to vote NO. Though with over a month to ago, further anticipated narrowing in the opinion polls would encourage more Scots to vote YES.
And finally Jon Snow of Channel 4 News on Israel creating 500,000 more refugees by blowing up tens of thousands of Palestinian homes, many of whom will find their way to Britain, as the Jewish fundamentalist state continues to attempt to wipe Palestine off the face of the earth all because the 'Man in the Sky' told them that they are the 'Chosen People' and then gave them the land of Palestine that they have been stealing since 1946. Lucky for Scots that Scotland was unknown at the time the Jewish myths were compiled else we may now be hearing about the Glasgow Strip being bombed and the occupation of West Lothian.
Source and Comments: http://www.marketoracle.co.uk/Article46802.html
By Nadeem Walayat
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Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.
Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 1000 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk
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