What can stop the housing market juggernaut? On Thursday, Halifax Bank revealed that house prices rose 1.8 per cent in February, maintaining the annual property market inflation rate at 9.9 per cent. Despite the increases, Halifax and other analysts are sticking to their forecasts that house price gains will slow later this year. I'm not convinced.
The current rate at which house prices are rising, at a shade under 10 per cent, looks, at first sight, to be unsustainable. Halifax's own forecast for 2006 as a whole is just 5 per cent and it has some cogent reasons for predicting a slowdown.
Three interest-rate rises in the past seven months - and the expectation of another increase this spring - will reduce buyers' spending ability, the bank says. So will rising council tax bills and a lack of widespread pay-rises above the level of inflation so far this year.
Yet these issues are small beer compared to the underlying issue that is driving house prices inexorably upwards. The UK's housing market faces a huge mismatch between demand for and supply of property.
In 2003, the Government asked the economist Kate Barker to investigate this issue. In a thoroughly researched report, Barker concluded that while 230,000 new households were formed in the UK each year, just 165,000 new homes were being built.
She recommended radical changes to the planning laws and major investments in affordable housing. Four years on, little has changed. Demographic changes, such as an increasing number of single-occupancy households, have continued to push up demand for housing. Yet despite Labour's manifesto commitment to create one million more homeowners - the supply of property has not increased.
Meanwhile, Britain's economy continues to be at its strongest in specific regions of the country, particularly the South-east, so that local pressures in some areas are even more acute than at a national level.
In addition, the continuing boom in the buy-to-let property investment market is pricing many first-time buyers out of potential purchases, though it does at least provide a constant supply of decent homes for rent.
There have been some positive reforms. Modest public sector investments in shared ownership schemes, for example, are helping a small number of people, particularly key workers, to buy property they would not otherwise have been able to afford.
But these initiatives are simply tinkering at the margins. In part, the problem is that ministers dare not incur the wrath of voters and, therefore, continue to insist that new housing can be built on limited brownfield sites, rather than in more attractive areas with more space.
This is a challenge that must be faced: local opposition to large-scale housing developments is understandable, but ultimately it's pretty selfish.
Similarly, it's easy to see why the Treasury, under Gordon Brown and his successor, doesn't like the idea of massive and sustained public investment in housing and the associated infrastructure required. But until that investment arrives - and the mismatch between demand and supply is finally tackled - you can expect forecasts of a house price slowdown to prove wide of the mark.
* MoneyExpert highlights one my biggest bugbears about money-grabbing insurance companies. The price comparison service says the average driver pays £180 for the privilege of paying car insurance premiums monthly, rather than in an upfront lump sum.
What a rip-off. Insurers claim that by not paying in full immediately, you're borrowing from them, so they are entitled to make a credit charge, in the same way as a furniture retailer might charge interest if you spread the cost of a sofa over a year.
It's a ludicrous argument. Buy furniture, say, and you get the whole thing upfront. But if you buy insurance for a year, it's not until the final day of the policy that you've received everything you're paying for.
This is just another way in which insurers fleece their customers.Reuse content