The prospect of a crash in house prices is, Euro 2004 aside, the national obsession. But it's not just an issue for individual homeowners; it also has the potential to cast a shadow across the economic recovery of the past few years and, possibly, throw Labour's plans for re-election seriously off course.
This week's comment by the governor of the Bank of England that prices are "well above what most people would regard as sustainable" has been seized on by doom-mongers. But we chose to look beyond the sensational headlines and asked the experts what they thought would happen if prices plunge (page 26).

The most interesting conclusion was that the ODPM's recent attempts to address the legacy of the crash in the early 1990s – the growth areas and market renewal pathfinders of the Communities Plan – would become largely irrelevant.

Sadly, the ODPM could not provide reassurance that civil servants were on top of the situation: improbable as it may seem, apparently no one at Eland House is even considering the possibility that the house price bubble might burst.

It may be that, with a general election around the corner, the government doesn't want to tempt fate.

But with the Bank of England itself warning the public to fear the worst, the ODPM should ensure it, and the programmes it funds, aren't caught out.

Election fever
Labour may have got a drubbing in the local ballots (pages 11 and 20), but the wheels have long been turning on the road towards next year's general election, in which housing is set to be central.

No one at the ODPM is even considering the possibility that house prices will crash

Surprisingly, the prime minister's office has identified neighbourhood renewal as a potential vote-winner when the nation goes to the polls.

It's surprising given the usual emphasis on health and education, and bold, given the chequered history of initiatives like the New Deal for Communities and local strategic partnerships.

But the government desperately wants to prove it is delivering on local agendas, and a concerted campaign to save communities blighted by drugs and crime will send a powerful message to voters.

This will involve a dramatic shake-up of regeneration and deprivation spending and the likelihood that RSLs are to be one of the main beneficiaries of the extended neighbourhood renewal fund is a big pat on the back for them – particularly after the recent criticisms of their management costs by the Treasury.

Source

Housing Today