The house price crash is over

Harvey Jones celebrated when the property market crashed. But now, he's been forced to accept that a recovery is around the corner.

OK, I admit defeat. After months of arguing that a good old-fashioned house price crash is exactly what we need, I've finally accepted that it's all over.

My one-man campaign to keep house prices falling (well, a two-man campaign if you include lovemoney.com's very own Ed Bowsher) appears to have failed.

The writing has been on the wall for some time, but when Nationwide reported the property market actually rose 1.2% in May, I finally buckled.

House prices in the UK simply refuse to drop to moderate levels. Vendors are refusing to drop their prices further, buyers are starting to meet their valuations. Bricks and mortar still look shockingly expensive. It seems that we like it this way.

Ker-Tring!

I first suspected I was doomed to defeat in March, when I pressed my nose against thfe window of a cramped, two-bed Victorian cottage in a small village outside Tring, Hertfordshire. It was a humdrum end-of-terrace and I guessed it would be on the market at £220,000. It was on at £325,000.

It was a crazy price.

True, it was "only" 35 miles from London, and nobody has bought it yet, but I bet they will.

Overpaying for property is what Britons do best. It is in our genes.

I'm not a bad person

I've had mixed views calling for further house price falls. I don't want to see millions plunged into negative equity and bailiffs shoo tens of thousands out of their devalued properties.

Nor was I trying to talk down the property market, as one person suggested on these message boards, so that I could snap up a bargain with a wall of cash I don't have.

I just thought that if one good thing came out of the recession, it would be an end to house price mania, and the start of a healthier relationship towards property.

I also hoped it would give young people the prospect of buying a place of their own, rather than filling the boots of a buy-to-let landlord.

Your home, my plaything

While living in rural Suffolk a couple of years ago, I got talking to a likeable couple in their twenties who had grown up in unglamorous Leiston, which services Sizewell B power station, and earned their living in Aldeburgh, a posh seaside resort just down the coast.

They accepted they could never afford to buy in Aldeburgh, home to genteel retired dames and brash London second-homers, but were in despair at being squeezed out of their hometown by overspill second-homers. Their friends on local wages were suffering a similar fate.

Soon after, a tax consultant I knew breezily told me she was "thinking of buying in Suffolk". Not moving there - "Leave London? Are you mad!" - just buying. The spare equity in her Muswell Hill home made £150,000 for a two-bed terrace in, yes, Leiston, seem like a snip.

She thought it would be nice to stay two or three weekends a year, and make a little on the side by renting it out.

So another local couple loses the chance of buying a home to raise their kids in.

And this cruel pattern was being repeated in thousands of towns and villages across the country.

Never, never, never

So I thought a property crash would bring some benefits. I didn't want to see the younger generation mortgaged up to the hilt to fund the winners in the equity lottery. Or millions of people barred from home ownership for life.

And the young ones the only ones who were suffering. I know people in their forties who suddenly realised they had left it too late to ever buy a house if they wanted to repay off their mortgage before retirement.

The rest of us, me included, who climbed onto the property ladder at the start of the boom in 1997, were sitting pretty.

We can't help ourselves

Now it looks like that isn't going to happen. Yes, affordability has improved, but not enough. And the merest glimpse of a green shoot has got everybody dancing round like spring lambs.

Estate agents are shining their suits. Lenders are lifting their LTVs. Property developers are practising their patter. And first-time buyers are sizing up damp shoeboxes and wondering if they could stretch to £325,000.

There is a wall of pent-up demand out there. And who do I blame?  I blame us. All of us. We are property die-hards. Extremists. Obsessives.

Years of watching home makeover shows have indoctrinated us. We are crazy about property. We just can't let it go.

Between bricks and mortar and a hard place

A wider problem is that we built our entire economy on a property bubble. The Government dare not let that bubble burst, because the whole economy will go pop with it.

So we slash interest rates to levels no government has thought necessary in more than 300 years, and hang the savers.

And if anybody had been mad enough to make me Chancellor (well, somebody gave Alistair Darling the job), I would have done exactly the same thing, because the alternative doesn't bear thinking about.

Of course I could be wrong

Ed Bowsher is still keeping the faith. He claims the house price bust isn't over, and prices have another 10% to fall.

He bases his argument on the fact that unemployment is set to rise sharply, and this will trigger house price sales.

Ed is obviously made of sterner stuff than me.

Perhaps I'm just having a wobble. I remind myself that house prices enjoyed the odd monthly rise in the 1990s collapse, and there were a few weeks during the Wall Street Crash when people brightened up and said "Don't panic, it's only a blip."

But I'm beginning to fear that property in the UK is naturally over-priced. I guess there isn't enough of it for the growing population. Now we'll have to learn to live with the consequences.

To that young couple in Leiston, my apologies. At least I tried.

> Read Ed Bowsher's blog on house prices

> Read more of our Property Week articles

> Compare mortgages at lovemoney.com