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Whatever is influencing the property market right now, the general election has nothing to do with it.  But change is on the way (probably).

The unexpected recovery in prices in the second half of last year was driven by three things; very low interest rates (at least for some); a fall in prices that made property look affordable (at least to some); and a shortage of supply that meant buyers had limited choice (at least in some areas).

Two of those factors are now unraveling. 

Firstly, prices recovered strongly in the second half of last year and bargains are harder and harder to find. 

Secondly, the number of homes coming on to the market has grown strongly since January.  GSPC estimates that the number of new properties on the market this year is up by more than 50 per cent compared to the same time last year. That means more choice for buyers and so less competition for those properties that are for sale.

Both of those factors should make it more difficult for prices to rise further. 

True, interest rates are still low and mortgage rates have improved significantly.  Moneyfacts calculates that the average interest rate on a two year fixed mortgage has fallen from 5.21 per cent in August 2009 to 4.63 per cent today. 

But funds are still limited and mortgage lending is unlikely to grow rapidly in the near future.  The Bank of England's latest ‘Trends in Lending' report sees no significant change in the relatively modest recent growth in mortgage lending.

So, a rational analysis would conclude that prices have recovered as far as they are going to for the moment and that there is little chance of further increases this year.

That's not, however, the impression that most people are getting.  The latest report from the Registers of Scotland received widespread coverage, much of which gave the impression that prices were rising strongly (in fact, they suggested an average rise since spring 2009 of 5.4 per cent).  Even before that report came out, research by Zoopla (the property web site) showed that 86 per cent of Scots expect prices in their area to rise in the next six months and by roughly five per cent.

Interestingly, the Centre for Economic and Business Research (CEBR) agrees with them.  It latest house price forecast predicts that prices will end this year up by five per cent, rise another 3.4 per cent in 2011 and by 9.0 per cent and 4.0 per cent in 2012 and 2013 respectively.  All of this despite sluggish growth and public spending cuts.  Why? Largely because the CEBR expects interest rates to remain exceptionally low for a long time.  By early 2011, it expects the average mortgage interest rate to be three per cent. 

On the face of it, that looks unlikely.  But the property market is heavily influenced by sentiment and if the majority is convinced that prices are going to rise, they could well do that as buyers rush to pre-empt further price rises. 

Overall, we conclude that prices could rise further, but that the odds must be on little or no further change this year.  That would be especially true if cuts in public spending prove to be more drastic than expected. 

The really good news, however, is the sharp increase in the number of transactions reported by the Registers of Scotland (RoS).  According to the official data, the number of property sales in the first three months of this year was over 24 per cent higher than at the same time last year.  Admittedly, these figures show growth from a dismal low point over a year ago, but the growth in the number of sales is a much more important indicator of market health than prices.  For people who want to move, there are more homes to choose from and a much, much better chance of selling your current home without undue stress.