The UK housing market is one of the most fascinating in the world. With prices well above their 2007 peaks in London and the south-east of England, more and more people say it is a bubble waiting to burst. And yet, there seems to be no shortage of buyers.

The factors propping up the UK housing market are strong. Interest rates are at their lowest in history, unemployment is low, the economy is growing and ordinary people see housing as the safest and highest-yielding investment around.

Still, judging by the latest headlines in the media, the mood is beginning to shift ever so slightly towards taking profits from what has been for many the opportunity of a lifetime.

MoneyWeek, the weekly investment magazine, is notoriously bearish about the property market in the UK. Last week it said a “train crash” was waiting to happen in the London high-end residential housing market.

In London, house prices are 35% above their peak before the global financial crisis, with the average price of a home above £400,000.

The increasing number of buyers who cannot afford to buy in the capital has seen prices of properties situated within commuting distance rise as well.

A big reason for this is the fact that the ratio of house prices to earnings is approaching its pre-crisis peak.

Lately, more than one set of data have shown that the housing market is slowing down.

The latest figures from Nationwide Building Society show that in the last three months of 2014, three regions in the UK recorded price decreases, while the growth in London home prices has slowed down.

RICS data show the number of potential buyers falling for the sixth consecutive month in December, when price growth was at its slowest since May 2013.

UK housing market and the election

Most of the commentary from pundits says this is temporary. The Telegraph wonders whether people should wait until the general election to put their homes up for sale, as uncertainty is high before the vote.

But there is no guarantee that the results of the election will dispel uncertainty, especially if extremist nationalist party UKIP becomes the third-largest party, nudging the Liberal Democrats out, as some opinion polls seem to suggest.

There is also no way of knowing when or even if the UK property bubble will burst – an arguably even bigger housing bubble, in Sweden, is an example that house price rises can go on for a long time if governments create the right conditions.

However, things are slowly becoming less supportive for the UK housing market, as it is difficult (but not impossible, of course) for the government to come up with even more creative ways to prop up the property market.

So far, the government has subsidised deposits for first-time buyers, has given tax incentives for buy-to-let landlords, it has cut stamp duty to encourage sales of middle priced properties, it is restricting the building of new homes with various regulatory requirements and it has been discouraging renting with legislation that heavily favours landlords.

London’s status as a safe haven for oligarchs from many countries around the world, reinforced by the fact that regulators ask the ultra rich buyers of luxury homes in the capital very few questions about the origin of their wealth, has been another contributory factor to the UK property bubble.

The latest ace up the current government’s sleeve is allowing pensioners, starting with April this year, to take all their pension pot as a lump sum.

Some analysts predict that this will give further impetus to the housing market, as cash-rich pensioners rush to buy homes to rent them out and get better returns than puny interest rates on savings.

Where to buy property now

But the clouds are gathering. For one, the Bank of England may finally decide to raise interest rates after the election, and this will make life more difficult for those borrowers who over-stretched to keep up with skyrocketing housing prices.

Secondly, the have-nots of the UK housing market are beginning to stir, so the government will soon have to show some sympathy to tenants, not just landlords.

Thousands of people marched in London at the weekend demanding more affordable housing and caps on rents. Such protests are likely to intensify as housing gets out of reach for more people.

The election results are highly unpredictable, but other than an outright Conservative victory, nothing would bode well for the housing market.

Labour politicians plan to introduce a mansion tax, which would affect sales at the high end – with risks possibly moving to the lower end as well.

UKIP, which could join a coalition with the Tories if they enter parliament, favours restricting migration, which has acted as a big source of demand for housing.

Add to this the strong pound and the still-depressed valuation in many continental European countries, and UK investors would do well to remain optimistic on buying property – but this time abroad, rather than in the UK.

@AntoniaOprita