Most of us in the mortgage business will readily admit that this year has been eventful one to say the least. Every day now we either read or hear about the prospect of a lender going bust or an impending property crash. Although much of this is based on speculation and rumour there is a possibility that we could talk ourselves into a recession and with it a property slump. The real problem at the moment, I believe however, is one of confidence. If the City and lenders don’t have any at the moment why should we homeowners?

Whilst no-one in their right mind would argue that house price growth will not continue to slow in 2008, this is because of a much needed correction and is not the beginning of a housing market slump, as so many so-called pundits are prophesising.

Let’s look at what we know rather than what we might guess about the outlook for housing market next year:

Are house prices increasing or decreasing?

Generally prices are continuing to increase, but as always it varies from place to place and sometimes from street to street. The latest figures from the department of communities and local government (DCLG) reveal that house price inflation in October stood at 11.3% which was up from 10.8% in September. In London, however, the increases were 17.7% and 16.5% respectively.

Next year I think we can certainly expect a slowdown, but still an overall increase.

What about prices in the longer term?

According to Mortgage Express, which is one of the biggest lenders in the buy to let market, nine out of ten of the landlords they interviewed believed that prices will continue to increase in the long term. They were either planning to increase their property portfolios in 2008 as they were positive about rental yields, or leave them untouched.

Are interest rates going up or down?

Almost everybody is expecting rates to be at the most 5% this time next year. Consequently most homeowners with a tracker mortgage at any rate can look forward to mortgage cost reductions in 2008.

Are rents likely to go up?

According to recent Royal Institute of Chartered Surveyors (RICS), and the Association of Residential Letting Agents (ARLA) rents are already up. When Mortgage Express asked their landlords about the prospect for rent levels in the next six months, 95% of them believed that yields will remain robust.

What fundamentals are driving rental growth?

When prices begin to stabilise or drop slightly people have historically tended to move into rented accommodation, so demand increases and rental yields improve. Given the chronic shortgage of housing stock in the UK, an increasing population due in no small part to an increase in immigration, there will always be a demand for rented accommodation- especially houses, as opposed to flats at the moment.

Is there an undersupply or an oversupply of property?

The Government's targets for new housing indicate there is a massive undersupply of property in the UK- unlike the USA. The talk of oversupply has referred mainly to new build flats in city centres and then again the picture is not the same in every city. In some cities there is a small oversupply whilst in others there’s a small shortage.

Is inflation under control?

The inflation rate remained steady in November at 2.1%, in spite of the average price of unleaded petrol breaking through the £1-a litre-barrier on the back of higher oil costs. With gas and electricity prices falling at an annual rate of 5% and falling vegetable prices offseting the increases in the costs of bread and cakes the Bank of England will be close to achieving it’s target of 2% inflation and will definitely be cutting interest rates again early in the new year.

Is population growth likely to continue and hence support house prices and house price growth?

There are more than 60.5million people living in the UK at present. By mid 2020 that figure is expected to grow to nearly 67million which will create even more pressure for more housing when there is already a shortage.

Should I be buying with all the doom and gloom around now?

Despite the current uncertainty there are a number of reasons why you should consider buying:

1. Lower interest rates. Interest are falling and will continue to do so in 2008.
2. Greater supply of property. A number of speculative landlords will be looking to sell up in April to take advantage of the new capital gains tax laws. In addition those heavy adverse borrowers who haven’t been able to repair their credit scores will unfortunately be forced to sell.
3. More bargains. The increase in interest rates has already led to a rise in repossessions by mortgage lenders, with RICS predicting there will be 124 repossessions a day in 2008. So you may be able to buy a property at a cheap price, particularly if you buy at auction, where mortgage lenders tend to try to offload their repossessed homes.

Professional investors in any market act against the crowd. This is perhaps the time to think like one of them and buy at a time of market pessimism, with a long term plan in mind.

Sounds reasonable doesn't it? The bad news is, if you don't have a deposit, you are still going to find it tough. As a result of the credit crunch, fewer lenders are offering to fund 100% mortgages or adding extra conditions to the deal.

On the other hand, if you have a 5% deposit you can still get on the property ladder, either as a first time buyer or an investor via joint equity- see http://www.jointequity.co uk. There are no waiting lists and no restrictions as you can buy a property anywhere.

Have a fun-filled Christmas.