How low can they go?

Two bubbles, two crashes; however, the New Labour bubble went much further than the Tory bubble, at least in terms of housing afforability.

During the last bubble, house prices as a ratio of average earnings, hit a breathtaking high of 7.5. Even with a 15 percent decline in house prices, today the ratio remains over 6. In fact, it is still higher than the peak recording during the 1980s boom.

I think I can speak for everyone when I say that we all think that this ratio remains way too high and that it is likely to fall to somwhere between 3.5 and 4. The question is how will it fall; will it be through rising incomes or falling house prices?

With the UK now in recession, we can discount a rising incomes scenario. So brace yourselves for another 15 percent fall in house prices during the next 12 months.