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MARKET COMMENT
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We're all obsessed with what might happen in the future. And this extends to financial matters too. Every year, the cobwebs are blown off several crusty old stockbrokers deep within the vaults of the City before they are wheeled out to make their predictions as to where the FTSE will finish up next December. For some reason, these predictions are held up as almost cast iron guarantees even though many commentators, ourselves included, tell people to ignore them year after year. The same applies to the plethora of New Year share tips you see in the papers. Every now and then, one or two will hit the mark but it's important to appreciate these are just a random collection of thoughts from several individuals mainly designed to fill column inches. They do not represent a structured portfolio designed to spread your risk across several sectors. They probably won't fit very well with any existing shares you might have either. All too often, these tips attempt to shoot the lights out and produce a spectacular performance. But the chances are they will be heavy losers. This year though, predictions about house prices seem to have taken precedent. You can take your pick from a 30% fall to a 10% rise. So expect the average UK house, now worth say £120,000, to be anything from £84,000 to £132,000 come next Christmas. That's a ridiculous range for a relatively illiquid asset like housing. The trouble is that these are all pure guesses. No one knows how people will react to price movements next year or to any external influences. It was interesting to see some of the comments by house builders such as George Wimpey (LSE: WMPY) and Bovis Homes (LSE: BVS) on Wednesday though. Both companies remarked, independently it seems, that the 25% and 30% gains reported by the Nationwide and Halifax for 2002 appeared artificially high. Of course, it is in their interest to ease fears of soaring prices. On sale price per square foot, which seems as good a measure as any, Wimpey and Bovis have seen increases of 10% and 8% this year. I've been keeping a beady eye on my locality through several property websites over the last six months and haven't noticed any real price increases either. All this sort of evidence is anecdotal of course, but it makes you think that perhaps the housing bubble isn't quite as severe as some people think. That isn't a prediction though!