Housing guru Professor David Miles was likened to the gravity-fearing chief in the Asterix comic books after his doomsday predictions about the housing market last week.
The chief UK economist for Morgan Stanley has released a report forecasting a crash in house prices, sparking a fierce conflict between industry gurus. The economist says a sharp fall in prices is likely at some point in the future, although it could be one or two years away.
He says: “Our simulations suggest that we could still get a year or so of rising house prices. We do find that significant falls in house prices are needed relatively soon to match demand to supply.”
Jonathan Cornell, technical director at Hamptons Mortgages, likens Professor Miles and other market pessimists to Vitalstatistix, chief of the village in Asterix, who had only one fear – that the sky would fall on his head tomorrow.
Cornell says: “But as Vitalstatistix always says, ‘tomorrow never comes’. Doom and gloom predictions about the housing market quickly become boring. We all remember Professor Miles report on the mortgage market in 2004 which tried to explain why borrowers were not taking out long-term fixed rates.”
John Wriglesworth, economist and PR guru, says there is no pressure for house prices to fall.
He adds: “Professor Miles is talking through his proverbial. He should go back in his box and stick to being an academic.”
Cornell also points out that a few years ago Capital Economics similarly predicted house prices would plummet.
He adds: “Strangely enough we have not heard much from it as house prices have surged.”
Ed Stansfield, property economist at Capital Economics, accepts it got its prediction wrong.
But he says: “The idea that Professor Miles is barking up the wrong tree is fundamentally flawed.”
He agrees with Professor Miles that house prices could be affected if there are major changes in the macro-economic environment, and although economic recession and high interest rates are not on the horizon the housing market is vulnerable to a shift in sentiments.