How to deflate Osborne’s housing bubble?

During the Brown bubble, most economic commentators spotted nothing – buying the theory that the West was adopting to a new era of permanently lower interest rates. Jeremy Warner and Jeff Randall stood out amongst a consensus which spied no danger. But a new generation of economic commentators are more sceptical. Allister Heath, an associate editor of The Spectator, has long had his eye on all this. And in today’s Times, Sam Fleming calls out Osborne’s housing bubble. His analysis is certain to annoy the Treasury, which wishes to present soaring property prices as part of a durable economic recovery. There’s so much concern that the Bank of England’s new Financial Policy Committee is meeting on Wednesday to discuss fears about a new housing bubble. There is plenty troubling data to consider. The number of people employed in the property world is booming (right). Fleming’s piece highlights a sobering analysis by Smithers & Co which shows that the British housing market is three times more expensive than that of the US, measured by house prices-to-disposable incomes (below).

How did the US get it house(s) in order? Perhaps because the US let the bubble burst, and tolerated foreclosures aplenty – and is now enjoying a real, sustained and deserved recovery.