An Infometrics report for QBE has stated that house prices are expected to be 24% higher in three years time. As the Rates Blog says this implies that “inflation-adjusted house prices were currently 15% above their long-term trend-line but could get toward 30% above the trend by June 2012”.
The people commenting on the blog seem incensed, but, given the balance of probabilities Infometrics found that 8%pa growth in house prices over the next three years seemed like the most sensible forecast.
There are reasons for this as I mentioned in a comment. But I’m not going into them in detail. Why? These are private forecasts that a client decided to release parts of. This discussion and knowledge is what Infometrics sells, so you would hardly expect them to completely give away their IP? I know that Infometrics is more than willing to spend as much time as possible discussing these forecasts and risks with clients – as that is how the service works.
However, given the admission that the price level seemed high historically I think this may bear some relationship to the “imbalances” that they discussed publicly.
Obvious disclaimer: I work at Infometrics, as I say.
Update: Not PC makes some good points. I agree that the indication of this sort of house price increase signals other issues – it shouldn’t be taken as “good news”.