Spread betting: making money as house prices fall

published 31 October 2005

Few people really want to face facts, but there is little doubt that UK house prices are heading for a fall, writes Thierry Laduguie. The optimists may continue to tell us that all is well, because, while prices are high relative to income, interest rates and unemployment are low. But this isn't a static situation. Rates are on the rise, as is consumer debt, and the actual numbers of hours we work as a nation is stagnant. All of this suggests we are near a turning point in the cycle. At the same time, the buyers who have been fuelling the boom are pulling out. First-time buyers are priced out of the market and now buy-to-let investors - who for some time replaced them - are no longer making money on new purchases because yields are too low. Soon they will stop buying. IG Index is quoting 163.8-166.4 for UK house prices in March 2005 (ie, average house prices will be between £163,800 and £166,400, according to the Halifax). If you sell at 163.8 for £1,000 a point and the spread falls to 151-153 when the bet expires in March 2005, your profit would be £10,800 [£1,000 x (163.8 - 153)]. Thierry Laduguie is a technical strategist (www.eyield.co.uk) and editor of Spread Trader (020-7633 3604).