Last Saturday’s Dominion Post front page story was about the local red-hot housing market.
Lower Hutt’s biggest residential real estate firm’s boss, John Ross, was quoted saying he’d never seen a market with so much demand pressure. To various extents this is the case nation-wide.
I mention this for a reason. A few months back on this blog I remarked about the spate of forecasts from Bank economists, all predicting in the gloomy economic times ahead, big falls in house values.
This was reminiscent of the same forecasts from Bank economists after the 2008 banking crisis, on that occasion predicting in some cases, falls of 50%. I rubbished that then as I did this time.
Prices are set by supply and demand. In this country housing demand massively outweighs supply. Add to that historically cheap interest rates and far from a collapse in value, prices are likely to soar.
The end of the lockdown admittedly caused a current boom as permission was finally granted for everyone to come out from under their beds (so long as they were kind of course). But the salient fact was the demand-supply imbalance.
As I also wrote, a possible exception might be inner city Auckland apartments, developers, as is their wont, seemingly producing a glut. But not so with housing.
Here’s the question though. Over the years our media frequently reports the views of Bank economists on a wide range of economic issues. They have one uniform consistent factor, namely their prophecies are nearly always wrong.
Harvard has actually established a Chair in this subject, namely why, year in and year out, economists exchange rate forecasts are not only always wrong, but diametrically so. If in January they predict say that the pound will fall in value over the year ahead against say the euro, always, always the opposite happens.
This phenomenon on my estimation, has been the case for at least the last quarter century. In my comic novel “OGG” published 18 years ago, I had an enterprise making a fortune, solely by researching each January, economist’s consensus world-wide forecasts on different currencies movements, then backing the opposite outcome.
The problem with economic forecasting is that economics is not a factual science but a behavioural discipline and when it comes to human behaviour, always expect the unexpected.