Farewell to housing boom and bust?

Stability has returned to the housing market

Are rapid rises in house prices a thing of the past?

A clutch of recent data suggests the UK property boom is cooling.

One well-known economist believes that house buyers have now seen the last of rapid rises and falls in prices.

Roger Bootle, economic advisor to Deloitte & Touche, says house prices will now rise between 4% and 5% annually, slightly higher than the general level of prices.

Some other economists say it is too early to tell.

House price stability

Mr Bootle has long forecast the end of inflation.

In his latest report for Deloitte & Touche, he argues that "the abolition of mortgage interest tax relief, combined with low general inflation, the new monetary policy regime and higher stamp duty, have brought a more sober attitude to the market as a whole."

"The housing market is the last piece of the low inflation jigsaw to fall into place. Stability in this market will be the clearest sign yet that the UK has fully adjusted to low inflation," he added.

He points out that for the housing market to be reaching stability with rates close to 6% is itself "remarkable".

"The end of the boom and bust in the housing market will help to bring greater stability in the economy as a whole. After all the ups and downs of the past 25 years that would be a major prize to have won," he added.

Pre-emptive strike

In the days when interest rates were set by the Chancellor of the Exchequer and the Bank of England governor, rates tended to rise too little and too late to curb inflation, Mr Bootle says.

By contrast, the monetary policy committee has shown its willingness to act preemptively.

Some other economists agree with Mr Bootle's analysis.

Merrill Lynch's Michael Taylor said: "The lessons of the housing market boom and bust do appear to have been learnt ... double digit house price inflation does appear to be in the past."

But while fundamentals may support stable house prices, these could change if the UK joined the euro, he adds.

Others say it is too early to judge if rollercoaster house price inflation is dead, especially as annual price rises, although dropping by the month, remain above 10%.

Deutsche Bank UK economist George Buckley said: "The last time inflation was over 3% was in the early 1990s. You need a lot longer than seven years to suggest inflation is dead. It is a bit premature."