The debate over what should or could be done about it has raged all year. Wets who want to ease the plight of everyone suffering the effects of market forces have made common cause with Thatcherites who see the Government's primary loyalty to a property-owning democracy and argue that the Chancellor should do something to revive the market and float borrowers off the rocks of negative equity.
Suggested measures urged on Kenenth Clarke include the restoration of tax relief at 25 per cent on eligible mortgage interest, an increase in eligible loans from pounds 30,000 to pounds 40,000 or more, either for first-time buyers or for everyone; the suspension or abolition of stamp duty on all property sales, or at least an increase in the threshold of pounds 60,000.
Hardline advocates of market forces, however, have made common cause with those who believe that rising property values create a reservoir of inflation that threatens the economy, and have urged the Chancellor not to interfere or risk creating a fresh surge in inflation.
Both sides see the autumn as a turning-point. Both sides have right on their side. Both agree the depressed property market is the main reason why home- owners refuse to spend or borrow, why there is no feel-good factor, and the Government is heading for electoral defeat. But some pundits insist that the property market is at the trough and is poised to turn. If they are right this is just the wrong time to stimulate the market with tax concessions and risk triggering yet another inflationary surge.
Three times in the past 25 years, surging property prices have led within 18 months to a surge in the underlying level of inflation because prosperous home-owners, encouraged by surging property values, have gone out and borrowed money on the security of their homes.
The word in Westminster is that the hawks have won the argument and the Chancellor will do nothing to try to tackle the problem, but the campaign will go on at least until the Budget on 28 November.