Is there a housing bubble? This question is put endlessly to our policymakers and politicians. The trouble is it's not a very useful way of talking or thinking about the state of the British property market.
A bubble occurs when people borrow money to buy assets (in this case houses) in the expectation that prices will rise indefinitely, and banks lend money liberally because they hold a similar optimistic view of the future. These twin forces push asset values into the stratosphere and create the danger of a sudden painful correction of prices (or bust).
Yet prices can rise very fast – even as rapidly as they are at the moment – without signifying a speculative bubble. It is true that UK house price-to-income ratios are above historic averages, which could, in theory, indicate that prices are out of line with fundamentals.
Yet other factors suggest that those fundamentals have shifted. Interest rates are also considerably lower than historic averages. That means people can service a higher level of debt with a given income.
Furthermore, the supply of new housing is more constricted than it was in the past. And aggregate demand is also higher, pushed up by more people choosing to live alone. As Martin Taylor of the Bank of England's Financial Policy Committee (FPC) super regulator put it in a speech last week: "If you have an economic recovery, rising numbers of households and very tight supply…it would be surprising if [house prices] didn't [rise]."
That pretty much sums up the thinking of the Bank of England on the economics of the housing market. It doesn't see a housing bubble – at least not yet.
But none of that means the Chancellor's policy of subsidising mortgages, known as Help to Buy, is a good idea.
What most people are getting at when they ask whether we are seeing a bubble or not is probably something different. What they really mean is: are houses too expensive? For first-time buyers who need to stretch themselves and take potentially significant financial risks to get on to the ladder, the answer is plainly yes. For the wider economy (with so much cash and debt tied up in unproductive bricks and mortar), the answer is also plainly yes.
The solution to expensive housing is to boost supply, not to pump up demand further by making it more attractive for banks to lend, as the Chancellor is doing.
Housing construction seems to have picked up this year, but supply is still highly unlikely to come into line with demand any time soon. And that means prices will continue to rise, with all the familiar baleful economic and social consequences.
It may not be a bubble, but that doesn't make our housing market any less dysfunctional.