The City believes UK house prices will fall by 7 per cent next year in new tradeable derivatives contracts. These derivatives contracts are suggested to be the best sign of the market’s direction as millions of pounds are invested in them.
But Boulger – senior technical manager at John Charcol – says that while you have to pay some credence to the figures because it is people putting their money where their mouth is, he believes the figure of 7 per cent in overemphasising the market fall.
“I am predicting a 3 per cent fall in the first half of the year before the market stabilises in the second half of the year due to falls in interest rates, meaning around a zero per cent increase overall next year.”
He adds: “The longer the bank takes to lower rates the lower they will have to drop them.”
Both Nationwide and The Council of Mortgage Lenders have predicted house price inflation to fall to zero next year.
The contracts predict the average house price in the UK will fall from £197,817 to £183,970 in a year’s time. The contracts believe prices will remain stable around this level for the next five years before they start rising again.
But Boulger says he does not agree with this prediction either. He says he “would be prepared to bet as much money as I could that this would not be the case.”
The UK residential property derivatives market is estimated to be worth about £4bn, a threefold increase on the same time last year.