Overdelivered?

There is a saying about being careful about what you wish for which seems to apply rather aptly to current developments in the housing market. Reducing house prices has been an objective of policy for some time - and one that seems to be about to be delivered well ahead of schedule. A few braver commentators are venturing to say that a house price correction may not be the end of the world, may indeed be rather overdue and could be good news for first time buyers - and flicking through the property brochure at the breakfast table this morning there seemed rather a lot of scope for corrective adjustment. But am not sure that the housing market is flashing green as a success in performance reports at the moment.

Which is a shame - because a saner attitude to housing - where prices related more to actual consumption of housing services and less to prospective untaxed capital gains - would reduce the strange and pernicious housing bias of our economy. It would stop people being driven into massive overextension to buy - because renting was a "waste" - and stop mortgage lenders being tempted into lending to doubtful risks. It would stop people like me from feeling foolish for not being overhoused - and not borrowing to ensure I was - and missing out on the chance to stack up even more unproductive equity.

But even though anyone who is interested in housing as housing can be pretty sanguine about general house price movements, the fact that we ask housing to play to many roles - as investment portfolio, as future pension, as collateral for other borrowing, as a general source of feeling "rich" means that when the housing market starts to droop, the rest of the economy heads lemming like for the cliff.

Which always made reducing house prices an interesting policy objective - but one only to be achieved by stealth over years of gradual erosion relative to rising incomes - not by a step change in delivery of the sort we are witnessing now. And what would be interesting is whether this downturn changes attitudes to housing - or whether after a couple of slightly hairy years of market dislocation - with rising repossessions, thin markets as sellers strike, and new build dries up - we return to the same old spiral as happened last time round. Or will anyone fight the next election on policies explicitly designed to restrain demand as well as increase supply?