UK House Price Crash and Depression Forecast 2007 to 2012
In conclusion, the sum of the above analysis suggests that house prices having fallen by 19% are about half way to the lows, and therefore suggest that house prices will decline by 38% from the August 2007 peak. The housing market trend is clearly currently in the panic stage as we are witnessing near unprecedented house price falls at the rate of more than 16% per annum, far beyond that of the 1990's bear market. This rate of decline is not sustainable, and I am expecting this phase of the housing bear market to come to an end during the second half of 2009. However my expectation is that following the crash the market will enter a period of depression spanning several years after the market puts in a nominal price low and then embarks upon a weak up trend as the below graph illustrates.
Risks to the Forecast
The prime risk to the nominal house price forecast is the currency crash induced inflation, as earlier analysis suggested that house price falls can be brought to a halt by a significant currency devaluation, which has already taken place to the tune of 30%. This will mask the real terms house price falls that will make itself evident in the protracted housing market depression where house prices are not able to keep pace with inflation and therefore continue to erode in real-terms.
My next newsletter will aim to forecast the major trends for financial markets during 2009. To receive this on the date of publication subscribe to my always free newsletter.
By Nadeem Walayathttp://www.marketoracle.co.uk
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