The futures market is now pricing in strong growth in the housing market, with the Halifax index priced to rise by 6% over the coming 12 months and by 12% over 5 years.

This is a marked rise in the prices from just a month ago and reflects the uplift in the Halifax index against which the futures prices are measured and the overall rise in other house price measures.

The Tradition Future HPI - a derivatives-based measure of future house prices - in September priced the Halifax non-seasonally adjusted average house at £174,745 in a year's time. This compares with the one-year-out price of £163,549 posted in August.

And the 5-year future price is put at £184,636, which represents solid growth, but still leaves average prices almost 9% down on the peak reached in 2007.

It must be said that, while the futures market can be a good gauge of the direction of prices may go, the it is used as a means of hedging and so is prone to exaggerating the likely degree of change.

Also the degree of month-to-month change in forward prices seen in recent months suggests uncertainty and so the rapdily improving futures market should by no means be seen as proof of an equivalent improvement in the housing market.

Expert comments from within the futures market seem to chime with the cautious views of housing experts generally.

Peter Sceats, who heads the real estate division of Tradition, sees reason to expect suppressed growth on the basis of the ratio of average house prices to average earnings (HPE Ratio), which he sees as a key house-price forecasting tool.

"The US HPE ratio now stands about 15% below its long-run average suggesting that, by historical standards, US houses are now cheap. But the UK HPE Ratio is still around 35% above its long-run average," he says.

"Given that the housing market still faces considerable challenges in the form of high unemployment, restrictive lending and an increase in all types of taxation (including stamp duty), it would be surprising to see house prices continuing to increase at their recent rate."

But there is good news for house builders who may wish to hedge their risk. Over the past 18 months to two years the market was heavily weighted by those hedging against price falls, so deeply depressing forward prices.

If this changes and the market starts to lean more heavily towards hedging against price rise, the derivatives market may provide an opportunity to purchase risk reduction at very comforting forward prices.

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