What could stop house prices rising and even send them into reverse? The two obvious answers are rising interest rates, or a serious weakening of the economy leading to higher unemployment.

The second is unlikely, at least in the next two or three years, since the British economy is expected to grow steadily at least until the end of the decade. Interest rates are more of a threat. At least one more rate increase is almost certain, and if the world economy keeps accelerating there could be more. Finally, there is the level of prices themselves. Trees don’t grow all the way to the sky; there comes a point when prices are so high that any further rise would make houses unaffordable, so prices have no way to go but down.

When will this point be reached? Nobody knows. My guess is that the period of rapid adjustment from the relatively low house prices of the 1980s and 1990s is over. If so, the present relationship of prices to personal incomes — with average prices fluctuating between five and six times average incomes — will prove to be the norm. In that case, buying a house at today’s prices should prove a decent long-term investment but no guarantee of instant riches. ANATOLE KALETSKY

Editor-at-Large, The Times

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