What do you plan to be doing in 2031?
Simon Jackson is managing director at SDL Surveying
If that sounds like the type of lazy question you might get asked at a job interview, which is almost impossible to answer, then I apologise.
While it’s possible to have some kind of idea about potentially what you might like to be doing a long time from now, life tends to get in the way at the best of times, and I tend to think it’s probably not wise to be planning a decade ahead.
Anyway, the ‘job interview’ line of questioning wasn’t my intention however I did drop it in to highlight just how difficult – and unhelpful – it is to look too far into the future because, quite frankly, even with all the insight in the world you simply can’t predict events.
Go back a decade to 2011 just in this country. We were one year into a coalition government, one which was charged with trying to put the economy on track after the Credit Crunch, one which was dealing with a recession, embarking on austerity measures, and the like.
We were five years away from the EU referendum and everything that would subsequently follow that. Back in 2011 the thought of even holding a referendum on our membership of the EU with the Liberal Democrats holding governmental power seemed utterly fanciful, and yet look where we are now.
In 2011, according to the Halifax, house prices had fallen by 1.3% annually. The average UK house was worth around about £160k according to the same source, and after a year of falls, few would be confident about what the next 12 months would bring, let alone the next 10 years.
So when I see suggestions that prices will ‘soar’ by 30% by 2031 – recently made by Comparethemarket – I have to take these predictions and forecasts with a large dose of salt, albeit with the caveat that I’m fully aware of the demand/supply imbalance in this country, I’m fully aware that we’ve not built enough homes for decades, I’m fully aware that we are a country which likes to own property, and I’m fully aware that property has tended to perform well in terms of capital growth.
However, even running as surveying business, would I really be able to stick my neck on the line and say what I thought prices would do over the next decade? Perhaps I might be willing to look at the figures and take a view.
So, for instance, as a back of a fag packet exercise, I might look at those Halifax figures from 10 years ago, compare them to the average price now, surmise that it’s gone up by about £100,000 (approximately 60%) and suggest that similar growth would take the average price up to £420k-ish.
But that would not be something I’d be willing to stick my reputation on, or feel the need to so, and it is very far removed from Comparethemarket who are suggesting the average property price will be just shy of £324,000 in 2031, while in London it would be around £620,000, albeit that its methodology is a lot more robust than mine.
So, why might Comparethemarket go here and what might it achieve? After all, are we likely to be scouring through those predictions made 10 years ago in 2031 to see who got it right and who got it wrong? I very much doubt it and those who have indulged in this might well be hoping we don’t anyway, because the chances of being right appear very small.
There is however an important point to be made around this, and it’s the message it sends to those who are not on the housing ladder yet but might harbour plans to purchase for the first time in the short-term.
Because, what it says, of course is that prices are not going down – the longer you wait, the more you will pay, and therefore you might want to stretch yourself now, you might want to offer more than the property is worth now, you might want to take on too much debt now because if you wait then that property you want might get even further out of reach.
And I’m not sure this is a good signal to be sending. Essentially panicking people into trying to buy now doesn’t necessarily create a stable housing market, especially if they buy at what turns out to be the very top of the market, taking on too much debt and potentially slipping into negative equity.
So, perhaps it’s best for all of us not to become too fixated on what might, or might not, happen to house prices in the very long-term. Forecasts of prices 10 years hence may seem like a finger in the air exercise, but they could shape attitudes right now, and result in action being taken which simply shouldn’t be.
Advisers will clearly play a strong role here, and so should surveyors – we are not valuing on what the price might be in 10 years’ time but what it is right now. That is all we can do and, quite frankly, it is the only way the market can (and should) function.