So, is it possible to make money out of property without the boring necessity of actually buying a house, paying stamp duty or dealing with oleaginous estate agents? The answer is yes: by betting on the movements of the British housing market.

Spread betting, as it is known, has proved fabulously lucrative for players such as Simon Smith, 33, who makes rather a good living by sitting in his office in Leeds working out what is going to happen to house prices — and placing his money accordingly.

Smith began for a bit of fun four years ago when property spread betting was in its infancy, and proved so adept at predicting the swings in the market that he packed in the day job as an IT systems analyst at Leeds Metropolitan University. Remember the property crash that never happened (or, at least, has not happened yet)? Smith bet against the likelihood of a nose dive and cleaned up.

“I’m surprised more people don’t do it, given how much spread betting takes place in this country and our national obsession with house prices,” he says. “But maybe most people have already taken a huge gamble on the market, with their own house.”

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So how does Smith do it? Three or four times a week, he logs on and makes trades on the basis of where he thinks house prices, in a variety of markets, will be at a given quarterly date in the future. He sets both an upper and lower price, thus providing the “spread” for others to bet against. Cantor Spreadfair, (www.spreadfair.com), the company Smith uses, takes bets on the average London house price and the average UK house price.

When the given date comes around, the Halifax quarterly house price survey is used as the official indication of where the market is. Smith gives an example of how it works. “The current spread that I have posted for the average London house in September 2007 is £297,500-£300,000,” he says. “Now if the Halifax index comes out in September and reveals that house prices have gone up above the £300,000 mark, and if you were betting up, you will have made money. But if you had been betting up, and the market is still somewhere below £297,500, then you would have lost.”

His best month? “December 2003. It was a point at which many people were expecting a crash. However, I thought that the market wouldn’t go down very much. And bet on it.”

There was indeed no crash. “It’s about understanding the perceptions on the housing market, against what is likely to happen,” Smith adds. “I have got it wrong sometimes and lost money.”

Not very often, however. Smith is coy about how much he has made, but it has been enough to pay off his mortgage. In fact, he has sold off most of his buy-to-let portfolio, keeping just two properties that he rents out. Is he a gambling man at heart? Not really. “I’ve always been good at maths. And I enjoy taking calculated risks.”

Are there many other Simon Smiths out there? Not that many. Andrew Garrood, co-managing director of Cantor Index, which runs Cantor Spreadfair, says property spread betting is still a “nascent” industry.

Part of the problem with gambling on house prices like this is that the time span involved is short; money is made or lost much more rapidly than by investing in actual bricks and mortar. It is also not for the faint-hearted: if things go wrong, they can go very wrong indeed, and, unlike with other more conventional forms of gambling, you can end up losing more than your initial stake — making the whole thing somewhat akin to financial Russian roulette.

“Spread betting appeals to people wishing to carry out short-term trading, and who want to make a quick win from the property market — without the need to put up capital,” says Justin Urquhart Stewart who runs Seven Investment Management, a company that provides financial advice to high net-worth individuals.

“However, because your loss is calculated by the difference between your estimate and the reality of the prices, you can end up losing a lot more than your stake if prices move against you. I think spread betting on property is for professional speculators only.”

But if the market were to take off, could you enter a remarkable world where abstract betting on house prices was bigger than, and even potentially affected, the housing market itself? “Yes,” says Rob Thomas, senior policy advisor at the Council of Mortgage Lenders. “But we are nowhere near that now.”

There are other ways, of course, to make money in property without forking out for a building. You can buy shares or invest in real-estate investment trusts. But if you consider yourself a true property anorak with a healthy obsession with the movement of the market (and you are pretty good with numbers), then spread betting might be your golden opportunity.

www.spreadfair.com

How property spread betting works

Say the latest average Greater London house price is £269,000,” says Rob Thomas of the Council of Mortgage Lenders. “On the Cantor website, the figure for December 2007 is £298,000. If you bet a point (£1,000) that the market will go up, it will have to have risen above £298,000 by December for you to make money. If prices reach £300,000 by then, say, you will get a cheque for £2,000.”

How about betting down? “You might predict house prices will stay flat at £269,000. If they do, thus undercutting the predicted estimate of £298,000 by 29 points, you would make £29,000 profit (on a stake of £1,000). But if the market rises to, say, £310,000 you stand to lose £12,000.”

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