One reason is that supply is relatively fixed. An upswing in prices always increases the number of sellers, but most of these want to buy homes too. The net supply of new housing can grow only slowly and is limited by the availability of places to build. As Mark Twain remarked, they stopped making land.
Psychological factors exaggerate the swings. When demand rises, the urge to get in before all the best houses go or prices rise out of reach compounds the upswing. Confidence in the market vanished within weeks in 1989, but is now returning with a vengeance.
So as long as there is a business cycle, there will be a bigger housing cycle. We have plenty of these episodes to look back on during the last 40 years.
The best counter-argument is the possible reduction in demand for property as a hedge against inflation. If people really believe inflation in Britain will stay low, there is less need to invest in bricks and mortar for an asset that will gain real value over many years. That would make for a one-time reduction in demand for housing that would help keep house price inflation subdued for perhaps another five or 10 years.
For the time being, however, there seems every chance that the rest of the country will follow the 15 per cent house price inflation of Greater London. Prices are well below their long-term trend, earnings after inflation and tax are growing strongly, and building society windfalls will provide the funds to cover moving expenses and deposits. Against that, mortgage rates might rise by half a percentage point or so later this year. When the pre-election uncertainty is behind us, watch out for a housing market that looks a bit more boom-like.