Worried about a property-price crash or wondering whether now is still a good time to buy?
Depending on who you listen to, both concerns are warranted; equally, depending on how you decide to play the market, both scenarios could make you money.
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Nationwide Building Society has warned that house prices are barely growing. They rose just 0.2 per cent in May, following strong gains earlier in the year.
In some areas of London, however, prices have continued to grow rapidily over the past few months, with figures from the Haart estate agency recording a rise of 1 per cent in May.
Depending on which way you think property markets are going to go, there are various things you can do.
For those who do not want to rush out and buy a property or sell their own flat at a moment's notice, spread betting offers a potential hedge for homeowners in the form of house price futures.
At the moment three spread betting companies allow you to bet on the future direction of house prices.
IG Index offers the most extensive betting options, allowing investors to take punts on the 11 regions covered by Halifax house price indices, as well as the UK as a whole.
The others, Cantor and Betfair, concentrate on London and national house prices.
They tend to work by the betting firm offering a range on something happening, such as the rate of change of average property prices. This is the "spread". You can either bet higher or lower than the range, depending on in which direction you think the market will move over the next four quarters.
If your market prediction is correct, you win. Winnings depend on how far the result of the property market price change deviates from the spread, multiplied by the amount of the bet.
For example, if the average property price is currently £145,000, the betting firm may offer a spread of 140 to 150.
If you believe that house prices will crash, you need to ask yourself by how much.
If you think the housing market will fall such that the average property price within a year will be £135,000, then you might decide to bet the standard £1,000 on each point decrease below the spread.
If the property market does fall, you will win your bet - which will be multiplied by the number of points below the bottom of the spread the resulting final average price is.
This means that if the average price for a property is now £136,000 - meaning it is four points below the bottom of the spread - with a £1,000 bet, you would win £4,000.
It is also possible to use this system to lock in the value on your current property. If you bet that prices will fall and are correct, your winnings could cover the loss on your property.
If you want to protect your property from a downturn in the market, the amount you bet will need to correspond to the amount you expect property in your area to fall by, compared with the rest of the market. If you expect your property to fall by double the average, then you should take out a short bet at £2,000 a point, as each point normally represents £1,000 in property prices.
Spread betting on property prices became very popular in 2004 when the market rocketed.
However, interest in these services has since waned, according to IG Index, which has decided to stop offering such bets from September. "People no longer go to dinner parties and talk about property prices."
Will Armitage, at IG Index, the UK's oldest spread betting firm, says: "The hot topic of conversation today is where gold and silver prices are going to go.
"But that doesn't mean that we won't offer it again if enthusiasm for it returns."
Jack Houghton of Betfair agrees that the market for property betting is relatively specialised.
He says that, although Betfair tends to get more than 20,000 regular customers betting on the bigger football matches and horse races, most months there are only a few hundred people who bet on the property markets.
However, Mr Houghton says that there are still punters who are interested in betting on property markets.
"There are those that aren't interested in sport, but feel that they have an edge elsewhere - say a feel for where the property markets are going to go."
He adds: "We also suspect that some people are using these markets to hedge against property investment elsewhere."
If you decide to take a punt on house prices, bear in mind that if the indices move sharply in the opposite direction to your punt, losses could spiral.
Also, if you are looking to go short on the market to lock in value in your current home, remember there is no guarantee that your property will move in line with the house price index.
If the index did fall by 10 per cent, then some homes will have inevitably lost far more in value.
Originally published in the Financial Times, June 2006
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