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I have to admit to being baffled this morning by reports that house prices are set to increase by 25% (relative to what?), that rents will soar and that social (council) housing  will become scarcer.

Apparently we are building less houses than at any time since the twenties and because banks will only lend on prudent salary multiples we have the conditions for a broken housing market.

Am I missing something here?

I really want to understand the demographics. Apparently home-ownership is in retreat, we are back to 1980s levels (pre or post Thatcher?). If less of us are owning our own homes I would assume that there is a flood of rented property but apparently we have a shortage of properties to let which is driving rental inflation.

What has happened to the thousands of flats that were built at the tail-end of the late great property boom, do they lie open awaiting the anticipated property boom. If so, are we also expecting a boom in credit which will make their escalating values accessible?

At present, a mortgage has never been so affordable. Even at the improved margins attained by lenders, credit is cheap and a at a time of reasonably high inflation, unsustainably cheap.

If we cannot get credit at current interest rates, what is the argument to suggest that we will be able to get, let alone afford credit when rates move up?

Perhaps the markets are anticipating a major inflow of overseas investment into the UK housing stock. IS it possible tha the demand that drives up housing prices might come from investments from sovereign wealth funds? “We all live in a Bank of China house”- Robbie Fowler eat you heart out!

Intuitively, the warnings being splurged across the radio and newspapers this morning seem at best confused and at worst downright inflammatory.

If the mantra is “keep calm and carry on” then the housing experts worrying about a broken housing market need to leave off the hand wringing.

My suspicion  is that we are seeing major shift in our attitude to housing which the housing industry is struggling to get to grips with.

Ultimately housing is subject to the laws of supply and demand and the fundamental demand for housing as a means of guaranteed capital accumulation has been dampened by the inconvenient reality that the price of housing can fall as well as rise.

The expectations of wealth accumulation that grew in the years leading up to the financial crisis in 2008 has a massive overhang which is slowly crumbling. It will take some time for this market distortion to correct itself and while it does, the market will continue to worry. There will be calls for( (more) state intervention to return the market to its unbroken state.

But this is the point, if the consensus of the 90 and noughties has been “broken” and the certainties of capital accumulation lost, then no amount of political intervention or industry scaremongering will put humpty together again.

My guess – housing costs are too high in the rented sector and too low among those who own their own homes. There is no credit boom on the horizon and people are going to have to return to a much lower expectation with regards to home ownership than at any time in the last 25 years.

What emerges as the new housing market will be different. I suspect it will be less investment and more utility driven. In the meantime we are likely to see greater cash flows into conventional liquid investments. I’m spending on my retirement and enjoying the nice chap equity units I’ve been picking up in the last few months.

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