House prices are about to dive – want to bet?

A growing number of people, it seems, are gambling on making a bob or two out of falling house prices by placing a spread bet with Cantor Spreadfair, the spread betting exchange.

Spreadfair transacted contracts equivalent to £4.8m-worth of property on the exchange in January, a sure bellwether of uncertainty about the direction of property prices.

Apparently many Spreadfair clients have been looking to reduce their exposure to falls in the property market by betting that the value of the average UK house will be less than the current prediction of £169,000 by December 2010. This is the figure used by Spreadfair for its house price bets and is based on the quarterly Halifax house price index.

Other clients believe the market will not fall that far and are looking to buy exposure to the market at significantly discounted levels. The prices are determined by clients’ ability to place their own orders on the exchange and are therefore indicative of current sentiment in the housing market.

Nick Sproule, head of key accounts at Spreadfair, said transaction volumes on its house price exchange show that the British public is nervous. “As the credit crunch keeps a tight grip on our economy, homeowners are trying to protect themselves against further corrections in house prices. Our clients are currently predicting a further 15% fall in the average UK house price by December 2010 and that would represent one of the biggest corrections Spreadfair has seen to date.”

At the beginning of February Spreadfair quoted a spread of 194.5 to 195 for March 2008, equivalent to an average house price of £194,500 to £195,000. If you don’t think prices will continue to fall then you ‘buy’ or go high at 195. If you think prices will fall below £194,500 by March 2008, then you would ‘sell’ at 194.5.