The Centre for Economics and Business Research (CEBR) has declared that the house price crash is now over, as reported in the Telegraph.

CEBR has predicted that although there will be further falls of 3% throughout the remainder of 2009, property values will then grow by 2% during next year. It has also suggested the rise may infact be greater due to the collapse in new homebuilding.

Based on these predictions, at the end of 2009 prices will be 24% below their peak in the 3rd quarter of 2007.

This prediction follows the recent positive news reports regarding the housing market:

• Halifax, Nationwide and the Land registry all reported house price rises in July.
• The Royal Institution of Chartered Surveyors, which predicted at the start of the year that prices could fall by 5%, has now said it predicts home values could actually increase in 2009.

However, is it too early to call the bottom of the market?

In my view prices are increasing mow, not necessarily because of greater confidence in the market but because of the lack of supply. Prices bounced up and down for several years during the 1990s slump before recovering on a long term basis.

Mortgage approvals have risen recently but they are still extremely low compared to the levels that have been experience in the past during rising markets. Until mortgage lenders show a greater appetite for lending, particularly to first time buyers with lower deposits my view is any long term recovery is still some time off.

But in order to avoid being too negative even those of us who think this is not the end of the price slump still welcome all positive news in relation to market conditions. News has been negative for a long time, so any change to that sentiment in a great boost.

The Nationwide House Price survey showed an increase in house price in June of 0.9%. This follows an increase of 1.3% in May and now brings the house price reduction to 9.3% for the past year.

It is the first time since December 2007 that the 3 month change figure has been positive.

Although house prices have fallen nearly 10% in the last year this is the first time in 3 years that the annual rate of decline has been in single figures for almost a year.

All this is very welcome news. However restricted mortgage lending, fear of unemployment and the weak economy will prevent any significant improvement in the property market.

Until lenders become more willing to lend to those with less than a 25% deposit I cannot see how the market can have any sustained recovery.  Until first time buyers can get onto the property ladder the whole house buying process is at stalemate.

At the beginning of the year auction prices were at a 40% discount to the conventional market price. However, last week the FT reported that in May that figure had reduced to an 11% discount. The discount is at its lowest level for 15 months.

Despite the positive news though, all is not rosy. The article went on to report that futures markets are still pricing in modest falls in prices in the coming year - about 7 per cent.

When house prices are rising steadily, homes often sell at auction for more than the value implied by general house price inflation, because those bidding know they will not have to wait many months for a sale to be completed.

When house prices are falling, the sales at auctions can be expected to have lower prices than in the conventional market because bidders expect prices to continue to fall.

The reduction in the discount is consistent with a number of other housing data recently available showing the rate of decline in prices has definitely slowed.

However, mortgage finance is still very limited particularly for first time buyers without a large deposit. This will prevent any significant rebound in the housing market.

In most geographical areas the fall in the property market has severely reduced the number of properties available for sale. Another contributing factor is the pitifully low interest a vendor would earn with the funds if they did sell. As a result unless you are in the position of having to sell most are holding off until the market improves.

But the reverse side of the coin is that because of the lower prices and historically low interest rates the number of enquiries has risen. This has ensured house prices in many areas have remained reasonably stable and in some instances has led buyers to pay more than the asking price in the face of such a shortage of possibilities for anyone who is determined to move.

When we add to this the issue that new build supply had significantly reduced since last year the gap can only get bigger.

But based on the above, the law of supply and demand suggests prices will therefore rise. What do you think?

In the period since the Second World War UK residential property has on average doubled every 9 years. Residential property has therefore shown an unequalled track record of producing high and consistent capital growth.

Although there have been temporary dips in property values, property has subsequently recovered and values have gone on to increase.

For example, the Nationwide house price survey shows the average price of a house in Quarter 2 1989 was £116,674. Prices then started to fall and reached a low of £73,079 in Quarter 4 1995. However, prices then started to rise and by Quarter 1 2002 the average price had climbed to £118,100, a figure just in excess of the previous high. The figures available for quarter 4 2008 shows an average value of £156,828.

So even accounting for the recent falls in property value the average house is still worth more than twice the figure from 13 years ago.

Residential property has an unequalled track record of producing high and consistent capital growth. In the period since the Second World War the value of UK residential property has on average doubled every 9 years.

Yes, there have been temporary dips in property values but property has subsequently recovered and values have gone on to increase.

For example, the Nationwide house price survey shows the average price of a house in Quarter 2 1989 was £116,674. Prices then started to fall and reached a low of £73,079 in Quarter 4 1995. However, prices then started to rise and by Quarter 1 2002 the average price had climbed to £118,100, a figure just in excess of the previous high. The figures available for quarter 4 2008 shows an average value of £156,828.

So even accounting for the recent falls in property value the average house is still worth more than twice the figure from 13 years ago.

Property is viewed as excellent security, and as a result banks will lend investors money to purchase a property investment. You do not need to find 100% of the property value as an investment. You only need to find a proportion of the value in order to be able to purchase. However, although you invest just a portion of the funds you will actually receive capital growth on 100% of the asset.

Imagine you own a buy to let property portfolio with a value of £500,000. You will put down a deposit (say 20%) and you borrow the balance (£400,000) from the bank.

Typically since the War house prices have doubled every 9 years. If you assume this trend continues, then after 9 years your property value would have increased to £1 million. If you had an interest only mortgage your loan would still be £400,000. Your initial net worth (assets less debt) was £100,000, but 9 years later your net worth has increased to £600,000. Your net worth has increased by 6 times even though the value of the property has only doubled.

This is because you get 100% of the benefit of the increase in value. You put down only a percentage of the property value and borrowed the rest. However, the lender does not ask for a share of the increase, even though they financed a huge chunk of the property purchase.

Yes, I know, it seems odd, but the latest survey from Halifax highlights that the average price of UK homes rose by 1.9% in January compared to December’s figures.

Whilst I very keen to inject some optimism into the housing market against all the doom and gloom we need to be aware that this is just one survey and just one set of figures.

For example, last week, a survey by Nationwide suggested house prices fell by 1.3% in January, with the reason being that job worries were putting people off buying homes.

One set of figures on its own can never be enough to say the tide is turning. However, it is great that at last there is some good news available.

In my article on Monday I noted that Assetz had suggested distressed sales had reached a low and had potentially now bottomed out.

However, one important point to bear in mind is that even if this is correct, house price indices will continue to fall over the coming months. This is because indices are looking at historical data which may be up to 3 months old.

Therefore, for anyone looking at house price indices and deciding to buy once the indices are rising, the chances are you will have already missed the boat, particularly if you are looking at a distressed purchase.

By the time general house price indices have increased you are definitely much too late for a distressed property. since these prices will have been at a low many months earlier.

Property indices are a useful tool in gauging the trend in the market, but they are a not a be all and end all. Make sure you look at all available data- prices being achieved at auctions, how many lots do not reach reserve, how much stock developers have available etc.

The more research you do and the better your information, the more informed you can be in making a decision.

At the end of last week I was sent an article which suggested distressed house prices had reached the bottom and were now beginning to increase.

This was based on a report from Assetz, the property investment advisers group.

They reported that developers are starting to raise prices on distressed housing stock sales and that house prices at auctions also appear to have started to plateau since the New Year.

The reasons why they believe distressed sale prices have now reached the bottom:

• Many housebuilders are running out of completed stock
• Improvements in bank funding have allowed a number of developers to renegotiate their loans, which has avoided the need to sell at below cost.
• The recent falls in interest rates have significantly improved the position for homeowners on a tracker mortgage or on standard variable rate. This has reduced the urgency for a distressed sale.

Although they agree there will continue to be distressed sales, Assetz believe the huge discounts are now being moderated.

Has anyone seen any other evidence to either support or contradict this?