Commercial property investors should be wary of trusting economic forecasts, leading economist Tim Harford cautioned at the opening meeting of the Barcelona Meeting Point real estate symposium on Tuesday.
Commercial property investors should be wary of trusting economic forecasts, leading economist Tim Harford cautioned at the opening meeting of the Barcelona Meeting Point real estate symposium on Tuesday.
Addressing the topic of 'investment in an age of uncertainty' at a meeting organised by the Urban Land Institute, Harford said forecasts made by economists can be wrong and should not be the guiding influence on investments. To drive home his point, Harford suggested a monkey throwing darts at a dart board can be as effective as leading economists when it comes to predicting how the economy will fair in the future.
Emphasising he was not criticising his colleagues, Harford - who is a columnist for the Financial Times - said predicting what the world economy would do was 'just difficult' as there are so many variables to be considered. Conversely, he said that while an analyst for Royal Dutch Shell he and his colleagues came up with some predictions about the future prize of oil that seemed laughable at the time. They discarded the forecasts yet they ultimately turned out to be correct.
Harford said property professionals, like all business people, should listen to economists' advice on past trends and the current situation when making plans for the future.
The key challenges to the global economy, he said, were a potential slump in the US housing market, the price of oil, a potential dollar crash and higher interest rates. Property companies needed to take advice from |economists on past trends in order to adequately come up with forecasts for the future.
Harford said it was difficult to predict how a housing slump in the US would impact the global economy as it was uncertain how consumers would react. But he said that it was likely the European Central Bank (ECB) would raise interest rates in December. Harford told the ULI meeting that people had to gather as much information as possible and ultimately trust their instincts when making economically-sensitive plans.
