There is no denying the direction of travel in the housing market:

house prices are rising in almost every part of the UK, and in some parts they are rising quickly and approaching their pre-recession peak in 2008.

The latest figures from the Office for National Statistics, published yesterday, show that prices rose by 8% in the year to the end of March, although there are considerable variations across the country. In London, for example, the increase was 17% while in Scotland the average was 0.8%, although Edinburgh, Aberdeen and large parts of Glasgow have seen bigger increases.

Loading article content

The question is whether these rises should be celebrated or regretted and finding an answer to that question is complicated by the fact that politicians are so reluctant to talk about the possible downsides of another runaway rise in the housing market. The party leaders know rising property prices are popular with a large number of voters and they do not want to risk alienating that sector of the electorate.

However, without an honest appraisal of the housing market's potential to undo the economic recovery, the longer-term danger is that a rise in house prices will be supported and encouraged, through the Help to Buy scheme for example, for political rather than economic reasons.

Yesterday, for example, the Prime Minister said he would consider any changes to Help to Buy proposed by the governor of the Bank of England Mark Carney, who said this week that the housing market and price rises pose the biggest threat to the economy recovery, but any change of heart by the Government seems unlikely. Mr Cameron knows that the scheme has proved popular and in principle it is a good idea because it allows people who can afford a mortgage but do not have thousands to put down as a deposit to buy a house.

The flip side is that Help to Buy, however well-intentioned, could encourage people into deals they cannot afford, particularly when interest rates start to rise, as they will soon, and artificially inflate the market. Even if the scheme remains, there is a case for lowering the upper limit from £600,000 to something much closer to the average house price.

There is some truth in the claim that London is distorting the overall picture but the risk remains that the recovery is overly reliant on the housing market. That is all right for some, but other parts of the economy remain resistant to improvement; wages, for example, which have still to overtake inflation.

The only way forward is a recovery which balances improvements in the housing market with more sustainable and reliable foundations for recovery but that can only be achieved through restraining the housing market when necessary.

The new stricter rules on who can apply for a mortgage may help but a new housing bubble, talked up by home-owners in the traditional way and supported by politicians fearful of doing anything else, remains a real risk. Concerted action is required to head off that threat.