Malcolm Cannon: Credit crunch will create more stable housing market

The news from Lloyds TSB that the average house price in Edinburgh fell in July renewed fears that the market may be heading for a downturn. The report may also have come as a surprise to some given that house prices have been rising recently.

Indeed, ESPC's own figures reveal the average house price rose by 11 per cent in July, and preliminary figures suggest a further increase in August.

As ever, it's important to look behind the headline figures.

Rises this year have been inflated somewhat due to an increase in the proportion of larger homes selling. As the mix of properties selling returns to more regular levels, this should bring the average back down.

The inflation we saw earlier in the year also came at a time when the number of homes coming on to the market was outstripping the number of sales - a fact that probably seems counter-intuitive. Typically it takes around six months for an imbalance between supply and demand to be reflected in house-price inflation.

With that said, it's important to retain a sense of perspective. ESPC said that we expected house prices in Edinburgh to be broadly unchanged over the course of 2010 and, by and large, this is still the case. Recent increases are likely to represent a short-term spike with the average house price falling back to levels seen at the start of the year soon.

Longer term, a period of stability remains the most likely course for the market, with the number of homes selling inching upwards but prices remaining static. Investors will have to do more research to identify "hot spots" or individual properties where the asking price is a little below the market value.

We might not see a return to the sort of rises we saw earlier in the decade but if this leads us to a more stable, sustainable market in the long run then we can all welcome that.

• Malcolm Cannon is chief executive of the ESPC