UK housing market 'is set to crash' » Housing » 24dash.com

The Liberal Democrats issued a stark warning to homeowners today that the property market is set to crash.

Deputy leader Vince Cable said a decade of mismanagement by Gordon Brown had led to a "collective madness" around house prices which threatened to derail the economy.

Speaking at the party's conference in Brighton, he lambasted the "professional optimists" who had convinced the public that values could keep going up for ever.

"History tells us that bubbles burst; and every housing boom is followed by a crash whatever the papers say," he insisted.

Mr Cable's intervention came as the panic around troubled bank Northern Rock continued, with customers withdrawing billions of pounds in the wake of the "credit crunch" caused by irresponsible lending.

A study has also indicated that younger people are increasingly relying on rising property prices to pay for their retirement.

Mr Cable laid the blame for the crisis squarely at the door of Mr Brown, saying that he had done nothing to prevent the housing market overheating during his 10 years as Chancellor, and now "chickens were coming home to roost".

History demonstrated that the housing "bubble" had to come to an end, he insisted.

"I deeply distrust the professional optimists - the banks, estate agents, government ministers - who seem to believe in an economic version of levitation," Mr Cable told delegates.

"This is something Gordon Brown understood ten years ago when he said in his first budget: 'I will not allow house prices to get out of control and put at risk the sustainability of recovery.'

"But that is exactly what he did. Why? Why did he exclude housing from the measure of inflation? Why did he not give the Bank of England responsibility for this, the most important and destabilising element in inflation?

"Why has he taken 10 years to produce a housing policy? Why was council and other social housing drastically curtailed forcing families into owner-occupation they cannot afford?

"Why was he so frightened of tackling the banks over debt promotion, unfair charges and irresponsible lending?

"As long as the boom has gone on, he has been able to avoid answering these questions but his day of reckoning cannot be far off."

Mr Cable said there was now a widespread belief that the housing market was a "one way bet", which had led "reckless" banks to lend up to six times people's income in mortgages.

"We can see the frenzied signs of collective madness which always accompany an economic bubble," he said. "Until it bursts the bubble has a logic of its own, inflated by uncontrolled credit expansion and rampant speculative demand."

Developers across the country had been buying property and land and often leaving it vacant, contributing to the housing shortage, according to Mr Cable.

"Yet the Government's answer is to blame local councils and planning rules and it threatens to destroy the delicate balance between development and over-development."

Research by the International Longevity Centre indicated that the proportion of 25 to 34-year-olds contributing to pension funds halved between 1995 and 2005, as people increasingly stretched their finances to get on the housing ladder.

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