New figures have revealed that house prices fell for the third successive month in June, the latest indication that the nascent housing market recovery has stalled. And a housing market expert yesterday warned that a fragile housing market could be upset by rising unemployment as the government makes cuts to the public sector.

The Scottish property market, however, is predicted to avoid the worst of any slump.

Paul Diggle, property economist at Capital Economics, said there were similarities between the market now and in the early 1990s, when prices fell 17 per cent over three years. With the economic outlook worse than at the low point of the early 1990s and the house price to earnings ratio suggesting house prices are too high, Mr Diggle said he expected a market relapse.

The ratio of house prices to earnings currently points to an overvaluing of property, meaning reduced earnings levels could create extra downward pressure on property values.

“There are a number of parallels between the 1990s experience and now that suggest that the current recovery could be reversed in the coming months,” said Mr Diggle.

“The problems in the UK labour market are not over, and the fragile position will be made worse by looming public sector employment cuts. The current fiscal squeeze makes the 1990s experience look mild by comparison.”

His comments came days after the Halifax house price index showed a 0.6 per cent drop last month that left the average UK home price 17 per cent below the pre-credit crunch peak.

Last year’s recovery was due largely to an imbalance of demand over supply that pushed asking prices upwards. But more homes have been put on the market in recent months, easing the pressure on prices. And the housing market is in a more precarious position than in 1992, Mr Diggle claimed, with mortgage affordability likely to be threatened by the impact of the fiscal squeeze on household incomes.

“A period of flat prices is the best that can be hoped for, but relapse is the most likely scenario,” he said.

Matthew Sinclair, director of Saint Property in Edinburgh, said: “The real concern is the increase in interest rates and the effect on mortgage repayments. We are already seeing the correlation between low interest rates and mortgage rates widen and those refinancing a fixed term mortgage or taking out a new mortgage now, unless they have significant equity in the property, are seeing their repayments increase significantly.”

The direction the property market takes this autumn could define the outlook for house prices over the next 18 months, Sinclair predicted.

“The property market is very fragile and we are seeing increasingly more sellers coming into the market, which is giving our clients, the buyers, a much wider choice.

At the moment the supply and demand curve is moving back in favour of the purchaser, which will just add to the pressures on the market.”

However Robert Carroll, solicitor and managing director of MOV8 Real Estate in Edinburgh, claimed the property market in Edinburgh and the Lothians could go against wider Scottish and UK property market trends.

He said: “While the market for first time buyer properties and second-hand modern-built properties remains quite tough, with prices quite a bit lower than at the peak in late 2007, good properties in good locations are still selling and prices are seeing an upward bounce, even when general UK and Scotland-wide market trends are in the opposite direction.”

He predicted that Edinburgh and the Lothians would out-perform the rest of the UK and Scotland in the coming months regardless of the wider economic climate.

“Historically and far more recently, it has seemed to operate as its own micro-economy”,

·         The property market seems to have escaped the worst of Osborne’s budget.

·         The 28% rate of Capital Gains Tax will be paid by higher rate taxpayers with combined income and gains of more than £54,975.

·         This should not unduly affect investment in land as a means of having wealth in a secure asset.

·         More land should become available in the next few weeks from those who were waiting for the Chancellors plans.

·         Small rural based family businesses should also benefit from the entrepreneurs relief of 10% for the first £5 million.

·         Tax advantages on holiday lets, which are subject to certain conditions, have been reinstated enabling owners to offset losses against other income.  We may see wealthy professionals investing in second homes benefiting the economies of rural areas.

·         It is to be noted that the increase of stamp duty to 5% for £1 million + properties from next year announced in the last Labour budget will remain.

·         Also the Bank of England will have powers to restrict bank lending when it takes over much of the role of the FSA in 2012.

Value of Rural areas to the Scottish Economy

·         A study commissioned by The Scottish Government has found that a net total of £65 million is spent by tourists on wildlife trips generating 2760 jobs in Scotland.

·         1.12 million trips were made every year to or within Scotland with the main aim of viewing wildlife. This form of tourism appealed greatly to UK-based visitors and Scots themselves, accounting for 56 per cent of trips.

·         These statistics will be a consideration for land owners who encourage wildlife tourism and property owners who wish to take advantage of the tourist trade through holiday lets or bed and breakfast businesses.

Scottish & UK governments working together

·         The   Defra ministers in the UK government and Scottish Government’s Rural affairs and Environmental department meet today to discuss how they can work together on rural, agricultural and fisheries issues.

·         It was recently agreed Scottish Ministers and will have a stronger role during European Council meetings to better reflect the interests the Scottish farming and fishery industries and Scottish communities in the European decision making and policy process.

·         Fishing farming and food are areas where European Councils make decisions affecting Scottish property owners and it is important that they are well represented.

Saint Property

·         Saint Property offers advice to buyers looking to purchase property in Scotland.

·         We cover both residential & rural property ensuring a property purchase decision is made with sound advice.

·         We offer a pre-property purchase consultancy service for those who have found a property but need a second on opinion. We evaluate all aspects of a property on the purchaser’s behalf and report with an unbiased view of our findings.

·         Please forward this to anyone who may be interested in the Scottish property market.

·         Contact us for advice on +44 (0)131 478 4533 if you are considering purchasing a Scottish Property.

A survey by the real estate agency Knight Frank shows that a plurality of buyers in Scotland (34 percent) come from the wealthy South East region of England and include those who work in the City of London, financed by their seemingly recession-proof bonuses.

According to the April report, 29 percent come from Scotland itself, 28 percent from the rest of Britain and 9 percent from abroad.

What attracts them are the hunting estates, country houses and castles, which cost the same as a terraced house in central London or an apartment in Midtown New York. And, possibly, the fact that prime country houses recorded a 6.5 percent drop in price year-over-year.

“It’s like living in a landscape picture,” John Coleman of Knight Frank’s office in Edinburgh said. “People think it is a romantic notion to buy a castle — and, yes, it is a purchase of the heart, a trophy, for the bankers with their big bonuses, who we are finding are back on track after 18 quiet months.”

However, he added, it also is a purchase that makes commercial sense, because the lack of supply of country houses and estates helps to maintain value.

“It is hard to put a price on rocks and fresh air,” Mr. Coleman said. “The valuation of a Scottish estate is not merely a matter of square feet and the number of acres, which are often rocky and untamed with little agricultural value. We take into account the number and quality of the fish and the birds — and when it comes to stags and stalking, if the corries are deep and the countryside interesting, the value is higher.”

In the Knight Frank survey, the capital value of deer forests was reached by putting a price of £25,000 to £40,000, or $37,000 to $59,200, per stag; grouse moors at £3,000 per brace and salmon rivers at £10,000 per fish.

“Few buyers want the headache of managing an estate as a commercial venture, but even if they visit only a few weeks a year, they cannot afford to leave it standing empty,” Mr. Coleman said. “They hire a couple of local people to make sure they generate enough cash to cover costs and to look after the wildlife.” Such properties also are careful to record all kills or catches to prove the worth of the real estate.

There is money to be made: The cost of a day’s shoot of 300 birds works out at about £35 a bird, so a shooting party of eight might expect to pay £10,500 a day. Accommodation would be an additional £200 to £250 a day per person.

Recently, the Knight Frank office in Edinburgh oversaw the sale of the 350-acre Sanda Island, off the Mull of Kintyre, to a European buyer for a reported £2.5 million. For an additional £2 million, he also bought two other small islands, a five-bedroom farmhouse, three cottages and a tavern.

The office also has on the market Larach Bhan in Kilchrenan, 20 miles from Oban on the west coast. The six-bedroom house stands on 11.46 acres along Loch Awe and includes fishing rights. It is listed at £6.75 million.

Has the recent general election, which returned an equal number of seats for Labour and the Scottish Nationalists, had an effect on the market? Certainly, the pattern of voting kept the mood of independence alive by rejecting the Conservatives, but Matthew Sinclair of Saint Property Search in Edinburgh thinks the election has made no impact on the property scene.

Perhaps the most significant effect on Scottish land values has already occurred, when Scotland got its own devolved government with limited powers in 1999. One of its most controversial moves was the Land Reform Act of 2004, which gave every British citizen the right to roam on private land and for communities to buy any land that was on the market.

The act was the result of widespread resentment that much of Scotland’s land continues to be in the hands of private landowners. It is hard to get precise figures, but in 2003 a privately financed project, Who Owns Scotland, suggested that half of Scotland’s total of 19 million acres are owned by only 343 landowners. It also said 2.5 million acres were owned by private and offshore funds.

Among the landowners with the largest holdings are the Duke of Buccleugh with 270,000 acres; the Duke of Argyll, 173,000 and Baron Margadale, 73,000.

Understandably, perhaps, the legislation caused considerable concern among landowners, with Oliver Russell, owner of the 23,000-acre Ballindalloch estate in Banff, saying he feared a “Zimbabwe land grab.”

Mr. Sinclair said: “The current economic situation is putting everyone under pressure. Assets at the top end will come under pressure to drop their prices. On the other hand, supply may be limited now, but as people need to raise money, more properties will have to come on the market.”

“My prediction is that supply will rise in favor of the buyer,” he added. “You might pick up a bargain. But these days it is hard to say what is a bargain, there is so much uncertainty.

“We have interest coming from the Danes and other Scandinavian countries because they like the sport, properties are cheap, and it is accessible. The Middle East is opening up again, and I have been speaking to potential buyers in Dubai for whom Scotland is fairly unknown. They also love the sporting side, the stalking and shooting.”

He says he is also getting interest from Americans, who are concerned about the U.S. economy and want to invest elsewhere.

The recently listed Dalness Estate in Argyll, 82 miles west of Glasgow Airport, at £2.75 million.

The property includes a Victorian-era stone hunting lodge with five reception rooms and 13 bedrooms as well as three stone cottages in need of modernization. The prime asset, however, is the site — 12,672 acres of open parkland — and the hunting. An annual average of 17 stags have been shot over the past 10 years and an average of 78 salmon have been caught each year for the past five.

It was this kind of sport that encouraged the Danish entrepreneur Lars Foghsgaard to buy The Spott Estate near Dunbar in East Lothian in 2000. Now back on the market for £25 million, the mansion is set in 2,463 acres, with the North Sea and the River Forth on one horizon, while to the south stretch the empty spaces of the Lammer Muir Hills.

The mansion has three reception rooms, nine bedrooms and eight bathrooms. There are 14 cottages, four with permanent tenants who work on the estate, as well as a herd of cows and a flock of sheep. As for hunting and shooting, 3,859 pheasants were killed in the 2009-10 season, along with 3,169 partridge, 112 duck and 18 roe bucks.

Mr. Foghsgaard, 68, says: “We had an estate in Denmark, but the grouse shooting is so good here that we bought this place. I love the outdoor life, and we have shoots 10 days out of every 20 here.”

Mr. Foghsgaard, whose business makes equipment for the handicapped, says he and his wife were selling because they wanted to spend more time with their new granddaughter in Denmark.

He is insistent about one thing: “The rainfall here is less than 27 inches a year compared with the Scottish average of 44. Everyone assumes Scotland is wet, but we have lots of sunny days here.”

Instead, we worried about the ongoing semi-bankruptcy of the banking sector; about the suspiciously super-speedy growth in China; about the huge national debts accumulating across the West; about house prices in the US and UK; and, of course, about inflation.

Yet the markets kept rising – so much so that we had to start wondering when we would be forced to stop referring to the bear-market rally and start referring to the bull market.

No longer. In his latest letter to his investors, Hugh Hendry of Eclectica Asset Management notes times of historical change tend to be marked by “a clustering of debilitating events”. This was the case during the global collapse of 1929-1933. Then, as Liaquat Ahamed, author of Lords of Finance, puts it, we saw “not just one crisis but a sequence of crises ricocheting from one side of the Atlantic to the other”. And it seems to be just what we’re seeing now.

Think of the headlines this month – the Greek crisis; the ongoing falls in the Chinese stock market and renewed concerns about a Chinese property crash; the collapse of the euro; spiralling deficits forcing austerity drives across the world. That’s just the financial headlines. No wonder the bear market rally seems to have come to a pretty abrupt end. We may not be at a moment of “historical change”, but we’re certainly at a point where another crisis of some sort is less a possibility than an inevitability.

That’s something to remember before you get too carried away by this week’s horrible inflation numbers. The CPI may be approaching double the Bank of England’s target. But given the ongoing crises, to say nothing of the tax rises and spending cuts we can expect from June’s emergency budget, it would be a brave investor who’d bet on British interest rates rising this year.

Finally, some news for regular readers. I’ve bought a house. Yes, nearly four years on from the sale of our Paddington flat my husband and I are the proud owners of a slightly grubby Georgian townhouse. Given everything I say above and my long-standing views on UK property, I suspect it’ll turn out to be one of the worst financial decisions we’ve ever made.

But, thanks to Matthew Sinclair of Saint Property, our long-suffering search agent (can there be any-thing worse than helping a determined property bear buy a house?), we’ve bought a great house that will suit our family at a price well below bubble levels. As we hope to live in it for a good decade, we’ve decided not to worry about the fact that the only obvious way for its market price to go is down.

The thrill of finding the perfect home is what drives Matthew Sinclair, be it a flat, sporting estate or castle.

A decade after leaving chartered surveying firm Smiths Gore to set up his own property search agency, the buzz hasn’t left him.

He said: “My job involves seeking out properties to fit a particular specification, providing impartial advice and negotiating the best terms of purchase for our client, the buyer.

“Often the best properties are purchased through private sales, and we provide access to this market for buyers. Recently, we were alerted by a contact to someone considering selling their Edinburgh townhouse and were the first to view it.

“It fit the brief of one of our clients perfectly, they then viewed and we commenced negotiations on its purchase for our client.”

Sinclair believes a major part of the role is making sure investors don’t make a poor decision.

He said: “Often my role is about preventing buyers from making bad investments. While investigating a rural property with land in the Borders, I discovered the neighbouring landowner was in the early stages of negotiations for a wind farm to be built nearby.

“Other times, we will advise a client that a property is priced too high.

“This is the advantage of using a search agent, as estate agents act in the interests of the seller.”

Sinclair is also chairman of the south-west region of the Scottish Rural Property and Business Association and runs his own farm.

Outside of work, he enjoys spending time with his family and golf.

• May was the ninth time in ten months that saw a year on year rise in average house prices with the average house in Edinburgh selling for £230,559 an annual increase of 11.8% according to the ESPC.
• The average selling time is just over three months, 6 weeks less than this time last year.
• Following a harsh winter of both weather and movement in the property market the summer is already showing an increase in activity.
• The lack of supply in 2009 looks set to be redressed in the summer of 2010 with more property becoming available with the top end increasingly likely to be sold off market. There are buyers ready to move quickly when a property that fits their specification is introduced to the market.
• Saint Property considers this an interesting time to purchase with plenty of opportunities becoming available.
• Further speculation to be held until after the budget on the 22^nd June which will have major implications for the property industry.

 Mortgage Lending

• The Council of Mortgage Lenders report that in the first three months of 2010 lending in Scotland fell by 33% on the previous quarter which was put down to purchasers bringing forward their purchases at the end of the year to take advantage of the stamp duty holiday which ended in December. However this was up by 28% in volume and 36% in value on the same period in 2009.
• The CML policy consultant, Kennedy Foster notes that market activity tends to follow that of the rest of the UK but with a lag of around a quarter.
• There are 3,100mortgage products on the market 42% more than in July 2009 but that is still 90% down on three years ago. The most significant growth has been in 5 year fixed products.
• Some 85% - 90% mortgages are being reintroduced back on the market.
• Many lenders are further restricting interest only mortgages with the best options available now from private banks.

 Farmland

• There is strong interest in farmland from strategic purchasers looking to expand their current business or those who have reached the end of role over period.
• We predicted earlier in the year that more land and sporting estates would become available in the second half of the year and we are beginning to see this trend appear.
• Time will tell if the discretionary purchaser will become active in the market with an appetite for sporting estates.

 Saint Property

• Saint Property offers advice to buyers looking to purchase property in Scotland.
• We cover both residential & rural property ensuring a property purchase decision is made with sound advice.
• We offer a pre-property purchase consultancy service for those who have found a property but need a second on opinion. We evaluate all aspects of a property on the purchaser’s behalf and report with an unbiased view of our findings.
• Please forward this to anyone who may be interested in the Scottish property market.
• Contact usfor advice on +44 (0)131 478 4533if you are considering purchasing a Scottish Property.

From the outside, Sandley, set in 178 acres of Dorset countryside near Gillingham, looks like the quintessential English country house. Open the front door, however, and you are transported somewhere else completely — Notting Hill, perhaps. It’s all clean, crisp interiors, marble and oak floors, plasma television screens, halogen ceiling lights — and not a swirly floral pattern in sight.

Surely some mistake? Not at all, says Jan Scott, 54, who has overseen the transformation of the Grade II-listed six-bedroom house into something quite extraordinary. When she and her husband, Peter, head of a marketing and communications agency, bought the house five years ago, she was underwhelmed by its quaint interiors. “The style was really rather tired,” she says. “We needed to strip everything bare.”

The couple, who spend weekdays at their home in South Kensington, central London, and weekends at the estate, rebuilt parts of the house, created a new wing for a summer dining room and swimming pool, and installed underfloor heating, as well as the latest technology and fittings. It now has a media room, a gym, a games room and even a “dog spa” (essentially a custom dog-washing area, but sadly no sauna).

The work took two years and cost “a couple of million pounds”, says Scott, who adds that she is no fan of the traditional Colefax and Fowler style. “It’s quite an eclectic look, inspired by Andrew Martin’s designs.” A few antique pieces are on show, as well as her husband’s art collection, but everything else is a mix of leather, glass and chrome, as well as plain, understated fabrics and neutral colours.

The couple paid £5.375m for the estate, which was once the principal part of the Sandley Stud and was given to the nation by the Queen Mother. Now, with their son no longer at school in nearby Sherborne, and Scott busy renovating their ski chalet in Méribel, they are putting it on sale this week for £9m.

Not everyone feels the need to import London chic into the countryside. Holt Manor, set in 94 acres in neighbouring Wiltshire, is another large country house that’s new to the market, and its interior, although smart, is much more traditional than Sandley’s. Yet there’s a surprise behind the floral soft furnishings, fittings and chintz: a labyrinth of high-tech sound, lighting, television and security systems more often found in a hedge-funder’s bachelor pad. The large TV screen in the study, for example, is hidden behind a mirror.

Anthony Fisher, a semi-retired entrepreneur, and his wife, Jeni, paid £4m for the Grade-II listed house, parts of which date from the 12th century, in 2002. They have since spent £500,000 on renovating the property, which is now on sale for £5.95m. Anthony says he did not want to strip away Holt Manor’s heritage. “Everything was modernised, but to keep a traditional feel,” he says. “We’re not in London. It’s important to match the inside of a house to its exterior and its history. I don’t think it’s fair to drag a property of this age so far forward.”

However different their views on interior design, both the Scotts and the Fishers have decided that now is the time to bring their homes to the market. They’re not alone. After one of the slowest starts in recent history, which has left the number of houses for sale 15% lower than last year — blame the budget, followed by the general election — there are signs that the traditional spring country-house selling season is finally getting under way.

“The election left people in turmoil,” says Rupert Sweeting, head of the country department for Knight Frank estate agency. Now that’s out of the way, he expects stock levels to rise over the next two or three weeks. “I think we will see the spring/summer active country market period extend into August, when it usually stops because of people going on holiday,” he says.

Nevertheless, we are not quite back to the boom times of 2006 and 2007.

“Buyers still feel the need to view at least four or five houses before they make a decision, even if the first one they see is perfect for them,” Sweeting says. “They have become much more distrustful of the market because it has proved so difficult to read since the start of last year.”

Most properties are also now being put openly on sale, rather than being offered discreetly “off market”, as was the fashion last year. Buyers apparently prefer this, Sweeting says, because they are worried they might be paying too high a premium on an “off market” deal — even though he has seen people who’ve been offered a house privately, turned it down, then ended up paying more for it in a bidding war on the open market.

What sells well now? The most important factor, as ever, is the quality of the house. Savills estate agency has studied properties that were valued at £1.5m in October 2007, dividing them into three categories — “best in class”, “average” and “blighted” — and looked at what has happened to their prices since. It found that the best were back at an average of £1.46m, while the average ones were selling for £1.39m and the blighted languished at £1.26m.

“Over the past six months in particular, the gap between properties that are best in class and average has narrowed, but buyers are still differentiating on quality,” says Lucian Cook, the agency’s head of research. In this respect, the country market is following London, where the best homes are already back above their peak 2007 levels, while less attractive properties are lagging behind.

So, what is considered quality in today’s market? Crispin Holborow, head of Savills’ country-house department, puts it down to three things: how attractive a property is, whether it is in a private setting and whether it is peaceful and quiet. If it ticks at least two of the boxes, it will sell.

“It is not necessarily where it is, it’s what it is,” Holborow says. Still, some parts of the country have certainly been doing better than others. Hampshire, East Anglia, Devon and Cornwall are leading the recovery, while the north is still struggling — except for a diamond-shaped area bordered by Leeds, Ilkley, Harrogate and Wetherby, where prices are rising gradually.

Are perfect modernised interiors still a crucial factor in determining how fast a property will sell? Not any more. “Buyers are more confident and, unlike a year ago, are prepared to put money into the property,” Holborow says. “So it’s no longer going to be a problem if something is not in good condition.”

This shows how much things have changed since last year, when it was only the high-spec, recently refurbished houses that sold well, as shown by the respective fates of two of the most important houses to come onto the market: Malverleys, in Hampshire, which was expensively and tastefully refurbished by its hedge-fund owners, sold at its £12m guide price almost immediately, while Kiddington Hall, in Oxfordshire, which was beautiful, but rather stuffy inside, with not a television in sight, was on sale for seven months before it was bought by Jemima Khan this March for close to £15m.

As a result of this renewed willingness by buyers to take on a project, even properties that have been on the market throughout the downturn are beginning to sell. Wix Abbey, in Essex, for example, has been available for 18 months at £995,000, with no interest — until now, as two buyers have tabled offers.

Those with the inclination, and money, to put their stamp on a country house might want to look at Toddington Manor, in Bedfordshire. This is a quintessential piece of England, a sporting estate with a pheasant shoot and fishing lakes, gardens, a croquet lawn, a cricket pitch, orchards and a romantic dusky-pink manor house that has 12 bedrooms, a billiards room, an orangery and a turret. It also comes with 176 acres of farmland, pasture and woodland.

The manor was last on the market more than 30 years ago, when the current owners, Sir Neville and Lady Bowman-Shaw, bought it in a dilapidated state for less than £100,000. “The whole place was in a state when we came here in the 1970s, but we loved it,” says Georgina Bowman-Shaw, standing in the Aga-warmed kitchen, with its lofty ceilings. “We had the builders here for two years before we even moved in — nobody had lived in the house for decades.”

The Bowman-Shaw family more than made up for that. What with the enormous renovation, their four children and now 10 grandchildren, the house and grounds have been well lived in, but the couple say they now want to find somewhere smaller to live.

In spite of the scale of the main reception rooms and the high ceilings, the house has a homely warmth. It’s in the gardens, however, which were brought back to life by Lady Bowman-Shaw (with the help of a team of gardeners), that the extent of the renovation becomes clear.

“It’s incredible what we discovered under all the undergrowth,” she says, pointing out once buried wrought-iron gates, now set back into the garden walls. “The children loved digging around. One of our buried treasures was this old stone path — they rolled the turf back and we found that it went on and on.” That path now runs the length of the herbaceous borders, elegantly lined by an avenue of pleached limes and lusciously planted with hostas, allium and hellebore.

So, with optimistic sellers such as the Bowman-Shaws putting their properties on the market, is there a danger of an excess supply that might drive prices down again, leading to the dreaded “double dip”?

Estate agents say the rare, top- quality properties are unlikely to suffer, but warn that others risk falling short. “There will be more property on the market, but not necessarily more buyers,” warns Henry Holland-Hibbert, a partner at Strutt & Parker estate agency who covers Buckinghamshire and Hertfordshire. “Those buyers will pay a fair and good price, but they will not be pushed into paying a big premium.”

It is official, the UK is facing its first hung parliament in 36 years, and unless you have been living in a cave, or indeed and airport for the last few days, you would have heard all about it.

The Conservatives failed to gain a majority in the current first past the post system on Thursday, falling short of an overall majority by 20 seats. This left an array of possible solutions – the favourites being leaving the Tories to govern with a minority government, or to form a coalition government with smaller parties.

The leader of the Liberal Democrats, Nick Clegg, is currently holding talks with Conservative leader David Cameron along with representatives from each party holding further talks about the possibility of a Conservative/Lib Dem coalition. The sticking point for the Lib Dems is currently electoral reform and the state of the economy and discussions have been carried out at the weekend to discuss whether the two parties can work together over these points.

If talks fail then we could possibly see the Liberals hold talks with Labour and other smaller parties such as the SNP to discuss a coalition with them. Prime minister Gordon Brown has already offered Nick Clegg a definite on electoral reform, something that David Cameron has been vague on. However, it would appear, and has been reported, that any deal with Labour will be more successful without Gordon Brown. Moreover, it has been suggested by Labour MPs that the PM should stand down.

Talks over the weekend have had the aim of being positive and to boost the markets and sterling today. The Greek financial crisis has been another major global pressure point and mixed with uncertainty in UK politics, sent the FTSE as much as 3.5% lower on Friday, barely keeping above the 5,000 mark.

Although eurozone rescue talks and a bailout plan agreed yesterday have boosted world equity markets, they have still mainly erased gains made so far in 2010. A government cannot be formed over the weekend, but it is important that all parties involved are seen to be making progress as uncertainty in all markets will continue.

Matthew Sinclair is the director of Saint Property which provides professional knowledge of markets worldwide for international buyers, specialising in Scottish property. He believes that at the moment the only certainty is uncertainty.

“This does not help any market, least of all property. The equity markets are unpredictable, especially with recent events regarding Greece, Spain and Portugal, and the state of these markets has a direct effect on the property market. Certainty and a strong government are required to stabilise the property market and allow it to move forward with confidence. We hope to see this happen very soon.”

Although progress has been seen to be made over the weekend, and European finance ministers have agreed a eurozone bailout deal which has sent the FTSE 4% higher, if negotiations are stretched out over the week, this initial boost in the markets could begin to wane.

You don’t need to know that the average house price is still well over five times the average income - or that the average first-time buyer was forced to put down a deposit of £50,000 in March, or even that more than 80 per cent of adults under 30 are unable to afford to buy any kind of house in the UK, according to the National Housing Federation - to know that house prices are still in bubble territory. Instead, you just need to look in an estate agent’s window. That usually does it.

That said, markets keep showing us that things can stay at the “wrong” price for years. So, saying that house prices are too high isn’t necessarily the same as saying they are going to fall. For that, we need a trigger of some kind - such as the subprime crisis that kicked off collapse in the US and a mini shock in our own market.

It is always tricky to spot the trigger in advance, but there does seem to be an unusually dangerous number of contenders at the moment.

Might it be the funding gap? Mortgage approvals for house purchases are still exceptionally low, yet mortgage lenders are even now warning that they could get lower thanks to a £400bn funding gap currently being filled by the Bank of England support schemes introduced at the peak of the financial crisis. These schemes will soon end and the new government has made no mention of extending them. Perhaps it will. But if it doesn’t, the past few years of mortgage drought might in retrospect look like something of a credit bonanza.

Might it be interest rates? The OECD has suggested that rates in the UK should move up to 3.5 per cent by the end of next year to stamp out inflation. I don’t think that is particularly likely - Mervyn King, Bank of England governor, has made clear that he will keep rates low to support the Con-Lib coalition as it cuts spending.

But what if rates did rise? Right now the average standard variable rate offered by most banks is about 4.5 per cent. A 3 per cent rise in rates (from the current 0.5 per cent) would take that up to 7.5 per cent. That wouldn’t exactly push up demand.

But we don’t necessarily need rising interest rates for mortgage rates to go up again. All we need is another interbank trust-leeching global crisis - like the one in Europe, perhaps. Note that Libor - the rate at which banks lend to each other and the rate from which many price their mortgages - has been creeping up again as risk aversion kicks in across the eurozone. The rise so far has been pretty modest relative to that seen during the Lehman Brothers collapse, but if panic sets in, it might not stay that way.

Other triggers might include falling real wages and an expected rise in unemployment as the government slashes its way through the public sector and rising taxes do for more service businesses.

There is also a new entrant into the mix: the coming rise in capital gains tax. We don’t know how high this will go, but most people with a second home or a buy-to-let investment are likely to face a much higher tax bill on their gains than they had expected. That means they are probably running the numbers on selling right now.

A house bought for £100,000 in 1985 would now be worth £490,600 on Nationwide numbers. Sell it today and you’ll pay CGT of £68,500. Sell it at 40 per cent and, assuming no inflation allowances, you’ll pay £152,200. That suggests you should get out now - even if you can only do so at below what you think the market price should be. Sell the £490,600 house today for £450,000 and you’ll still clear more post-tax than if you waited and sold at 40 per cent. Even my mother is at it - her buy-to-let properties are joining the glut coming on to the market this week.

So, all in all, I’m not holding out much hope that our much-loved new townhouse will make our fortune.

However, if you insist on buying, there is one thing I would recommend: do as we did and use a good search agent. It strikes me as very odd indeed that people go into a market in which they are not expert and spend hundreds of thousands of pounds, even millions of pounds, without taking advice from someone with their interests at heart (ie not an estate agent). A search agent will know houses are coming on the market long before they hit primelocation.com.

Given that the property business is a magnet for charlatans, take recommendations on search agents where possible - we used Saint Property in Scotland.

Good agents will pay for themselves several times over. Ours did - which at least means we will lose less money on our purchase than we might have otherwise.

Merryn Somerset Webb is editor-in-chief of Money Week. The views expressed are personal.