In other words, the house has become the unit of currency, replacing sterling. Pity there aren’t enough to go round, eh? And it’s a bit difficult to fit one in your pocket, or spend it a bit at a time.

More seriously, this deliberate policy of inflation is a sneaky way of robbing savers in order to pay home owners. But if there’s no point in saving, then where will the money come from to pay for mortgages? Will we just keep merrily printing it until we end up with Zimbabwe type inflation?

And to regard foreign purchase of our houses as “good for Britain” when we haven’t enough for our own population is insane.

The trouble with the supply and demand argument is that it if the fact they aren’t making land anymore etc was a cast iron rule, we’d not see crashes in the US, the big crash in Japan, the UK in the early 1990s, etc.

I think it’s therefore more supply *of money* and demand. Credit has been curtailed but foreign money has come into London.

Quite right that the cheap pound has supported London prices – I read somewhere 50% of all Central London purchases have been by Italians recently (they’ve also got a tax amnesty windfall to spend). In general, I think Internet doomsters underestimate how good the falling pound has been for the UK, although obviously there could be long term inflation consequences if it went into true free fall.

I definitely haven’t forgotten the low interest rate environment etc. I’ve just seen everything thrown at UK housing for 5 years now and still it refuses to moderate significantly. As I say, I still think prices are too high, but I’m nothing like confident they’ll correct, and especially not to order. I’ve just seen too many ‘triggers’ fire blanks before.

The property time-bomb is still ticking. Bailing out the more obviously insolvent banks, dropping central bank base rates to negative levels (in real terms) and straightforward money creation with a fancy-schmancy new label (“quantitative easing”) has prevented the almighty property crash predicted by the terminally bearish. Doesn’t stop the bears from being right, though: UK property is way overvalued and a reversion to the mean is inevitable despite house prices being “sticky down”.

I suspect we’ll see the carnage begin as interest rates start to creep up.

As well as historically-low interest rates, there is another factor propping up UK prices: the low pound. This makes property cheaper for our continental friends, and many others. In Euro terms, many houses have halved from their peak; this makes an interesting buying opportunity for overseas buyers and helps sustain prices.

I have an uncomfortable feeling that BoE will run for the former option, if only under pressure from politicians keen to avoid nominal public spending cuts. The resulting stagflation would be very nasty, leading to further collapse in the value of sterling, depressing saving and investment rates, and would blow a hole in the UK bond market.

It is perverse that policymakers in this country continue to reward debtors/profligacy and punish savers/investors, using the very policies which created the disastrous asset and credit bubble in the first place.