The house-price bubble is back

Until very recently it might have been possible to say that the British housing market was heading in the right direction. Average prices across the country were just below where they had been back in 2007 so down 20% or so in inflation-adjusted terms. Take London out of the equation and they are down rather more 5% in nominal terms and well over 20% in real (inflation-adjusted) terms.

Some areas of the UK were even hitting prices that make sense relative to history. Prices in parts of the north are down 40%-plus and, according to Sky Research, you can now buy houses in the likes of Blackburn and Durham for three or 3.5 times the average salary. There has also been less pain than you might expect involved in these pretty dramatic house price falls. Very low interest rates and endless bank forbearance, coupled with the kind of inflation rates that can really help make debt go away, have kept the wolf from a good many doors.

We haven't exactly been 100% supportive of government policy over the last few years. But if the big idea was to keep nominal house prices flat and to bring real prices down without causing too much of a drama, it was (bar London!) surely working.

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The problem now? The coalition is messing it up. 'Help to Buy' has brought back headlines we hoped we wouldn't see again for a good few years. "Queues at dawn for chance to buy home off-plan", said The Times this week. Oh dear. At the same time, prices in London are up 10% in the last year, while average prices across the country are up 3.3%.

It's been enough for the media to spend most of the week asking if Britain is seeing the beginning of a new bubble. That isn't the case yet. But we do still have quite a lot of our old bubble left to deal with. Having a go at reflating it now seems like a bad and rather unkind idea. That's particularly the case when inflating it involves encouraging young innocents on to the housing ladder when prices are at historical highs and interest rates are at historical lows.

A final point on property. If you are invested in property or perhaps you have been getting rents from a property you have inherited you might just want to check that you have been paying all your tax properly. Note that all income from property is taxed as income tax. Note too that Treasury chief secretary Danny Alexander thinks a good many of us either don't know this or don't care. He isn't having it. If the Lib Dems get to form another coalition, then HM Revenue & Customs is going to crack down on property-owning tax evaders. As ever, it might be best to get to them before they get to you.