"Lastly, with all the negativity in the economic press, it looks like the 3rd quarter repossession rate will increase. Let's hope that the employers and lenders pay lip service to this negativity and we get an even lower or static figure for the 3rd quarter."
It seems that my prayers have been answered OR that the employers and the lenders actually DID pay lip service to the negativity in the media and we DID get an even lower Q3 reposession figure. If you look at the figures for the past 4 quarters, you'll find that the down-trend is actually getting stronger:
- Q4 2009: 10,200
- Q1 2010: 9,800 diff 400
- Q2 2010: 9,400 diff 400
- Q3 2010: 8,900 diff 500
The results bear no resemblence to all that scaremongering in the media. In fact, it's quite the opposite. Economists were predicting Q3 GDP growth of 0.4%; it came in at 0.8%. This has since been revised down to 0.7% but is still way above economists' forecast. This and Q3 repossession figures means that we're still on target for achieving 38,000 or less. In fact, the CML are betting on a figure of 36,000 which is corroborated by the RICS who come up with the same figure.
I've noticed that when the WPM comes out with a forecast, the first thing that happens is that they're rediculed and ignored. When the first results come out, they show that the annualised figures are only slightly ABOVE the WPM's forecast; and they always end the year with actual result being BELOW the WPM's forecast. And, 2010's forecast is no different.
Remember when the WPM joked about a repossession figure of 32,000 for 2010? Despite the fact that they settled for 38,000 and it looks like it's going to be 36,000; the WPM's forecast for 2011 is 32,000. And, this time, it's no joke. We've already been corroborated by the RICS who forecast that the down-trend in repossessions will continue down to 33,000 which is a stone's throw away from our forecast.
Meanwhile, the CML have taken into account the ill-effects of the Public Sector cuts and deduced that the increased unemployment will increase the repossession rate from the expected rate of 36,000 in 2010 to 40,000 in 2011. I feel inclined to agree with the CML because other economists are consistently agreeing that unemployment would rise to 2.8 million before falling to before today's figures which showed a sharp rise from 2.47 to 2.50 already, before January's VAT rise and the cuts taking place. I mean there's already strong evidence for this.
However, you may remember me saying that the WPM influence the outcome so that, if they use 32,000 as the target, then there's a strong chance that they will achieve it. They will be helped by employers, lenders and employees who are the main beneficiaries of these targets. However, this may scupper the Government's aim to reduce the Budget Deficit and thus lose the triple-A Credit Rating which will make future borrowing more expensive.
The WPM are in a quandry: do they help as many homeowners as they can to retain their homes at the expense of the UK losing its credit rating after which the UK economy will lose money due to dearer credit; or help the Government retain the UK's credit rating? The answer is clear: the WPM will help the Government reduce the Budget Deficit and thus retain the credit rating.
However, the WPM will try to achieve both targets: increase GDP which will reduce the likelyhood of increased unemployment which will positively affect the repossession rate. Unfortunately, the spending cuts will have an immediate negative effect on the economy and growing it will be a slow and painful process. This means that 2011 will bear the brunt of all this negativity.
It's easier to destroy than to create and the effects of the spending cuts is destructive but is a necessary evil to protect future investments. Once this episode is over in 4 years time, the economy should be on a stable footing to start reducing the National Debt. You see, the repossession argument is a side issue but is one that the WPM took seriously and inflenced government policy to achieve the seemingly impossible targets. Now, the WPM has to concentrate on bigger things; hopefully, the work that they'll do will have a positive effect on the repossession rate. Remember, that the forecast is only 40,000 which is lower than that in 2009 and equal to that in 2008 so we've still retained most of the gains made already.
The Budget Deficit reduction can only be achieved if the government doesn't do any net borrowing. This means that the reductions don't ALL go to plug the black hole, but that a significant amount of it is used to stimulate the economy and I don't mean Quantitative Easing; I mean direct investment in all sectors of industry. The Government needs to alter the financial rules radically not only to prevent future fiascos but also that the financial institutions share the burden that all of us are being burdened with. After all, they caused it.
See also Analysis of the Property Market 2010
Remember that the expectation for 2010 is 36,000 repossessions and GDP of 3%. Q4 repossession results will be available in February and GDP figures in January. So see you then.
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