Nobody wants to be the bearer of bad news. That may be why it is almost impossible to find a housing market expert who predicts a crash - or even a slowdown - this year.
But don't be misled; there is increasing nervousness about house prices. One national newspaper last week forecast a modest downturn in 2007. And on Tuesday, the Land Registry said house price inflation had slowed for the third month running in November. Prices still rose, but at a much lower rate.
So, could 2007 be the year the housing market's 10-year bull run comes to an end? Not if those analysts brave enough to make forecasts are to be believed. The various estate agents, mortgage lenders, housing specialists and think tanks that have made specific predictions about house prices all forecast further gains.
At the bottom end of predictions is the long-time housing market bear Capital Economics, which expects prices to rise by 3.5 per cent this year. At the top end, one online estate agency is predicting rises of up to 10 per cent.
Cast your mind back 12 months. This time last year, there was no shortage of predictions that prices would fall during 2006. Most forecasters plumped for modest gains of 2 to 3 per cent. In fact, the average figure across the UK in 2006 was almost 10 per cent.
On the face of it, then, there's not much to worry about. Yet a minority of analysts - including some respected commentators - are anxious. For example, in a poll of economists in the Financial Times this week, 11 of 41 analysts described the housing market as suffering from "irrational exuberance". That's not quite the same as predicting a market downturn, let alone a crash, but their concern is, at the very least, food for thought.
Then there's David Miles, the respected chief UK economist at the investment bank Morgan Stanley. In November, Miles warned that only half the recent growth in the housing market can be explained by genuine issues of demand and supply; the remainder was due to a speculative bubble that could be about to burst.
The economist's warning is as close as any credible analyst has come to predicting a house price crash this year. "A substantial fall in real house prices is likely at some point in the near future, though it could be one to two years away," he warned.
Positive factors for the housing market include the continuing demand for property - from families, as well as immigrants and speculative investors. Interest rates low by historical standards also augur well for prices, as does relatively low unemployment.
On the downside, housing affordability - the cost of property relative to people's incomes - is now at an all-time low, reducing the supply of buyers. Moreover, interest rates are rising and so is unemployment. Big increases in utility bills have reduced the disposable income people need to service mortgage repayments. Record levels of unsecured debt are starting to bite.
All analysts must balance these factors, and others, before coming to a view on how prices will move - and so do homeowners.
THE BEAR CAMP
David Miles chaired a government investigation into the UK's mortgage market two years ago, so he ought to know a thing or two. The bad news is that Miles believes house prices will fall sharply, sooner or later - maybe as early as this year.
His argument is that speculative property investors, particularly in the buy-to-let market, have fuelled much of the 10-year boom. This has led to unrealistic expectations about house prices that have fuelled further inflation.
In fact, Miles says, while prices have doubled during the boom, only half of these gains are justifiable on the basis of demand and supply fundamentals. Some time, he warns, this pigeon will come home to roost. "This is a speculative element of demand, which is likely to be volatile."
Professor David Smith of the University of Derby says the Bank of England will have to raise interest rates more sharply than expected this year, leading to a slowdown in house price inflation and a downturn in 2008 or 2009. PricewaterhouseCoopers has issued similar warnings.
Michael Hughes of Baring Asset Management is one of the 11 economists who told the FT they believed that the housing market had been taken over by irrational exuberance. Hughes says: "Real house prices have deviated dramatically from their long-term trend and seem out of line with other financial assets."
Howard Davies, director of the London School of Economics, adds: "I cannot understand house prices in London and the South-east." And Charles Goodhart, a former member of the Bank of England's Monetary Policy Committee, warns: "If interest rates rise, the market will cool."
Capital Economics, the think tank, has been one of the most bearish property commentators, regularly predicting house price falls. This year, it is marginally more positive, forecasting an average house price rise of 3.5 per cent.
A spokesman warns: "The housing market may finally be about to slow." The group thinks the climate of rising interest rates is the most significant factor, particularly as record levels of unsecured lending are stretching borrowers' finances.
Like all forecasters, Capital says the picture is regional, with winners and losers in different parts of the country. It expects continued growth in London but a slowdown in Scotland and Northern Ireland, and warns that further manufacturing job losses would hit prices in Wales, Yorkshire and the Midlands.
Halifax Bank expects the capital to remain strong, with London the main driver of its prediction of house price growth of 4 per cent this year. Elsewhere, Halifax thinks Northern Ireland will perform well.
Richard Donnell, director of research at Hometrack, the property group, thinks a lack of houses for sale will frustrate the doomsayers. "We expect just 5.5 per cent of private housing to change hands over the year," he says. Donnell also predicts a 4 per cent rise in house prices this year, with sellers still holding the upper hand.
Charles Smailes, president of the National Association of Estate Agents, is a little more positive. "Subject to the economy maintaining its current course, we are expecting fairly steady growth of no more than 5 per cent in 2007," he says.
The mortgage lender Nationwidemakes a similar forecast - gains of between 5 and 8 per cent - and expects London and the South-east to do best.
Fionnuala Earley, an economist at the society, says: "There are few signs that the rate of house price growth will moderate in the short term. Evidence from estate agents continues to show that supply conditions are tight, with fewer sellers."
Nationwide thinks most growth will be achieved in the first half of the year, with prices slowing from summer on. It also thinks Northern Ireland, the best performer of 2006, will suffer the biggest slowdown.
Miles Shipside, commercial director of the website Rightmove, adds: "2007 is likely to see a much flatter market with growth stabilising and an annual increase of around 6 per cent." Rightmove, which has about one-third of all UK property for sale on its site, believes supply shortages will boost prices and that interest rate rises aren't a worry.
However, it is concerned about affordability, especially for first-time buyers, and about higher Council Tax bills. Rightmove predicts that the North/South divide will narrow, but that prices will still rise faster in the southern UK.
Both the Council of Mortgage Lenders (CML) and the Royal Institute of Chartered Surveyors (Rics) predict that house prices will rise by an average of 7 per cent across the country in 2007. The CML's view is that property sales will fall slightly over the next two years but, even so, it is predicting continued gains of a further 5 per cent in 2008.
Rics thinks sales could actually rise in number this year, helping prices, though it warns of an increase in repossessions. It predicts that the North-west and the East Midlands will be the slowest areas in 2007, but reckons London, Scotland and Northern Ireland will all outperform over the next five years.
Yolande Barnes, director of research at the estate agent Savills, is also optimistic. Forecasts of gains of 15 per cent for the South-east and London, and rises of 5 per cent in the North, Yorkshire, Humberside and the Midlands give an overall forecast of 7 per cent. Barnes argues that while mortgage payments increased after the two base-rate rises in the second half of 2006, wage inflation is rising faster than the cost of everyday living expenses such as food and clothing, boosting disposable incomes.
Assetz, the online estate agency, is most bullish, predicting that house prices will rise by between 8 and 10 per cent this year. Stuart Law, the managing director, says: "I expect the imbalance between supply and demand to drive house prices in the UK up by 8 to 10 per cent in 2007, allowing for an additional interest-rate rise in January."
And on the commercial property front...
* While houses have been soaring in value, commercial property - shops, offices, land - has also boomed. Figures from the Investment Property Databank shows that commercial property has produced average annual returns of 15 per cent over the past five years, well ahead of any other asset class.
* Shares in commercial-property companies rose sharply this week, following the launch of real-estate investment trusts (Reits). Property companies lobbied for Reits, and 10 have converted to Reit status. Reits are attractive because as long as they distribute most of their profits to shareholders in the form of dividends - at least 90 per cent - they won't have to pay income or capital-gains tax on the returns produced by their property portfolios.
* Investors interested in commercial property have the option of buying into Reits - which include big companies such as British Land and Land Securities - but there is also a competitive market in commercial property funds. These invest in the UK but, generally, also in Reits quoted on other global markets.
* Steve Buller, who runs Fidelity's Global Property Fund, says that the global approach makes sense for investors: "We know that property offers attractive returns relative to equities and bonds, and good diversification because they have a low correlation to them. A global fund has additional diversification because property is a local business with local drivers."
* Property analysts point out that there is growing pressure on the commercial-property sector, particularly in the UK, where interest rates are rising. It's possible that returns this year may not be so strong.
* However, Patrick Connolly, a director of the independent financial adviser JS&P Towry Law, believes that trying to second-guess short-term market movements is a bad idea in any sector.
Join our new commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies