The City is betting on UK house prices falling by 7 per cent next year in new tradeable derivatives contracts, which some bankers say is the best indicator of the market’s direction as millions of pounds are riding on the outcome.

David Oakley and Chris Giles, FT – 25 November 2007

These future housing contracts, which were published for the first time this year and have seen a surge in trading volumes in the past few months, are predicting much bigger falls in property values than other non-tradeable forecasts.

The derivatives contracts are also pricing much bigger falls next year than they were a month ago, when they were predicting a 2 per cent decline.

Peter Sceats, a derivatives broker at TFS Property, said: “Bankers, hedge funds and property companies are putting their money where their mouth is and that makes these prices more reliable than economic forecasts in many respects – full article