If the City traders in residential derivatives have their fingers on the pulse of how house prices are likely to move then by 2016 the average home will be worth less than today.

The index Future HPI, put together by Peter Sceats & Associates, provides an index of residential derivatives trades and it puts the average price of a house in December 2016 measured against the Halifax index at £159,076.

That’s £2,394 less than the average non-seasonally adjusted house price measured by the Halifax in January.

The graph shows how traders in residential derivatives expect house prices to fall this year by about 9%. They then expect them to flatline in 2012 before gently rising there after.

By the time inflation, whatever that might be, is taken into account, we can expect a significant correction in real house prices over the next six years.

Many may feel this is fanciful and certainly there is a tendency for the futures index to overstate the direction of change.

But even the correction suggested by these figures may not take the house price to earnings ratio back to its long-term average – if earnings growth is sluggish over that period.