UK house prices rose at 9.1 per cent in the last 12 months and are creeping ever closer to the levels achieved before the 2008 crash. So is there, or is there not a property bubble in Britain? That question sends anyone who pursues it tumbling down a rabbit warren of claim and counter claim. This is in large part down to that poisonous little word “bubble”, which has in the past proved such a slayer of economic reputations. In the run up to the calamity of 2008, when US house prices and financial assets were well into bubble territory, almost no economic experts or forecasters spotted it—certainly no central bankers.
The b-word has ever since assumed a great and heavy significance. Spokesmen from Number 10 blench at its use. Senior analysts at the Royal Institute of Chartered Surveyors are clear that there is no bubble.
But as Jonathan Portes, Director of the National Institute for Economic and Social Research points out, “It is very difficult to spot bubbles until they burst—and this can take considerably longer than one might think possible.”