In 1997 Gordon Brown said: ‘I will not allow house prices to get out of control and put at risk the sustainability of the future.’

However, week after week reports are issued by the Halifax, Abbey, Rightmove and other organisations with (vested) interests in the property market. They speak with one voice. Property prices are going up, and it’s a good thing. There is never any questioning of the damage that sky-high property prices are doing to the social and economic fabric of Britain. House price inflation is simply ‘a good thing’.

If food or energy prices were rising at eight per cent per year, let alone at 20 per cent, there would be outrage. There would certainly be alarm that such price rises were not sustainable and that increasing numbers of people were unable to afford a basic commodity. Commentators on the housing market, however, seem to be immune to such concerns.

House price inflation is said to be benign because it makes people feel richer, enables them to spend money (using equity release) and even provides an alternative form of pension. British homeowners have increasingly decided that one property is not enough, and investment in property in the form of buy to let has grown from almost nothing to 850,000 mortgages, worth a total £94.8bn.

Britain is in danger of becoming a rentier society. Most people who are not already on the housing ladder simply cannot afford to buy a property. In almost any other country this would not be such a problem, because there is less of a stigma attached to renting, and there are far better options available for social housing. In the UK this is simply not the case.

Rampant house price inflation is reminiscent of the dotcom boom and has potentially far more serious consequences. A fall in house prices is desperately needed for our own personal financial health, and also for the country as a whole.

I will not go into detail about why prices will surely fall, and fall dramatically; others have written extensively about this on the economics pages of the Guardian and elsewhere. Suffice to say that record levels of debt, record levels of income multiples to buy a property, the lowest ever number of first time buyers and higher interest rates do not indicate a rosy outlook for the housing market.

There has never been a bubble in history that has failed to burst. As soon as one hears talk of ‘paradigm shifts’, it is clear that we are in trouble. Nothing has changed, certainly not economic fundamentals.

Academics at the university of Aberdeen are currently running a project on this, and other, changes in society and believe that ‘when the implications of these developments are taken together, they hold the potential to produce profound and, as yet, largely unanticipated social consequences for this age cohort, as well as for UK society as a whole’.

To get on the property ladder now requires people – at least those who can afford to do so – to commit increasing levels of their income if they are to have any prospect of ever buying a first home.

Those who do make it onto the ladder are getting older. The average age of first time buyers is now 34. They are having to accumulate larger deposits and spend more of their earnings on crippling mortgage debts. They are being forced into taking significantly higher financial risks than any previous generation. Long-term mortgages lasting up to 57 years are tempting a record number of homebuyers. The financial information firm Moneyfacts said eight in 10 lenders are selling mortgages lasting 30, 40 or even more than 50 years.

Over 90 per cent of towns in Britain are now unaffordable for first time buyers. The difficulty in attracting key workers to areas where prices have risen highest has forced the government to introduce tax-payer subsidised house benefits for a small minority eligible for Key Worker Schemes.

This may not work and could even, like other schemes such as HomeBuy, simply give impetus to a housing market that would otherwise stall because of lack of affordability. Every participant in one of these schemes who buys a home on the open market is most likely keeping some other unsubsidised family out of the market. Indeed, why should tax payers subsidise current house price levels when they are causing so much economic damage?

Astronomical prices are acting as a disincentive against starting a family, leading to postponement or abandonment of having children. Couples who cannot afford to move to larger properties, or cannot afford to lose half a joint income, are pushed into having children later in life when their fertility rates are lower, stretching the gap between generations and lowering the national birthrate.

High house prices transfer wealth from the young to the old and from the poor to the rich. Inflated prices create an illusion of wealth, but it only becomes real when you sell up and go and live somewhere cheaper. Mervyn King, Governor of the Bank of England put it best when he said: ‘House prices are only a matter of opinion, whereas debt is real.’

The wider economy is also suffering from high house prices. The rises have led to an over-concentration of investment into property rather than in more productive areas, such as investment in companies.
To address the property madness – and out of control house prices – gripping the UK, Gordon Brown needs to do several things. Restricting the money supply, by forcing mortgage providers to adopt more stringent lending criteria would have a major impact on prices. In the USA the ‘sub prime’ lending market is unraveling at an alarming pace. The government must act before the same thing happens here, if it is not already too late.

Reintroducing a genuine regional policy would take some pressure off the south-east. Industries, especially the service sector, are far more footloose than ever before. The main constraint to relocation is a poor and expensive transport infrastructure.

Capital gains taxes on speculative property investments would be a powerful incentive to invest in alternative forms of savings and bringing UK house building levels up to European rates would increase the supply of housing.

Most people would actually benefit from a falling market. First time buyers would be able to buy their home more cheaply and take on less debt. Even those on the property ladder would benefit, as higher prices make it more difficult to move to a bigger or better house. If your first home has doubled in value from, say, £100,000 to £200,000 but the next rung on the housing ladders has also doubled, from £150,000 to £300,000 you are not better off because of rising prices. In fact, your next mortgage will be higher, you will pay more and you will have even higher levels of debt.

In February, the Guardian’s Ashley Seager spelt out the damage caused by Gordon Brown’s failure to prevent a housing boom. ‘It is worth reflecting again, after a decade of surging house prices, what it all means. We do not get richer as a society from rising house prices. We merely transfer a burden to future generations who have to pay more for their houses. We shut out the have-nots who cannot tap their parents for a deposit. We lock in a permanent underclass who have no hope of ever getting on to the property ladder.’

Gordon Brown devoted one paragraph of his Budget speech to housing, announcing a new shared equity scheme. That was, regrettably, not enough, and he may come to regret that our prosperity is built on a house of cards.