Property: Phil Spencer on Housing Market hopes and fears over the next year.

Last year was a remarkable one for property. There was unprecedented demand at the top of the market and record prices. The influx of foreign money coupled with the strong financial markets in the first half of the year created a new level of demand at the top end, the like of which has never been experienced before. Even with the downturn in the economy in the latter half of the year and sensationalist headlines in the press about "booms" and "busts" _ the top end of the market remained relatively untroubled.

The numbers provide the perspective: the five major house price indices (halifax, Nationwide, RICS, Land Registry and Hometrack) show an average of a ten per cent growth rate for the market as a whole; whereas the market for 5m-plus homes has grown by 48 per cent. Everything else falls in between. Seeing as the average house price is around 230,000.00 livre, the more you invested in one property, the greater should have been your return. The top end has been leading the field by a mile and it shows just how polarized the market has become.

The financial turmoil that began in August took the froth out of the market as concern over interest rates and the introduction of Home Information Packs undermined sentiment. Confidence has been diluted, but there is no evidence of the cataclysmic market collapse that was predicted.

The dynamics behind the whole market have turned upside down. The housing market in this country has traditionally been pushed from the bottom; first-time home buyers joined the bottom rung ans pushed things along. But over the few years the market has been stretched from the top. There's been an explosion of wealth and this had let to serious rise in demand. This factor, coupled with the fact that most of us aspire to live in the same types of homes means that there's an increased number of people chasing a finite supply of top quality homes.

In 2008, I expect we'll see a slowing in the rate of growth, as opposed to an actual decline. In the first instance a slowdown usually affects the sentiment of sellers as they wait for better conditions before putting their homes up for sale. This means supply of fresh stock to market decreases, which in turn increases the demand for each available property. This is the ever-shifting see how between supply and demand that either drives or restricts our housing market.

We should try to remember that it's not possible to understand property markets simply by looking into the numbers. Housing is a place to live, it provides shelter and a roof over our heads; where we live has a bigger impact on our quality than any other expenditure. It follows that the behaviour of homeowners doesn't lend itself easily desktop analysis by academics or economists.

Finnaly, caution is the watchword if you're in the market early in the year. Contrary to popular punditry, it is perfectly safe to be buying at the moment-so long as you're doing so for the right and with a slightly longer term view than in previous years. Most economists are saying interest rates have peaked, so it seems there is little to be gained by waiting a few months. While I believe prices will rise across the year, the market will certainly not be racing away- which means there is no pressure for buyer to reach decisions, Concentrate on finding quality, You can expect a greater choice of property going into the spring, but that will bring competition from other buyers... If you can find what you're looking for before that happens you'll stand a better chance of a better deal.