I'm picking this up from another thread as to discuss it there would go too far off the message of that thread. House prices in the UK are expensive. Eye-wateringly expensive. But just because something is expensive doesn't mean it is a bubble. The whole of the UK property market is skewed towards London and the SE, a tiny area up to about 80 miles from the City of London in which roughly half of the UK population lives. Pretty much every patch of land that hasn't been built on (and there is a lot) has a legal status that prevents building. The Green Belt (a ring of open land around London) has legislation which really works. We've even just created a new National Park in the SE (South Downs) which basically translates into forget even dreaming of building anything. In towns and cities in the SE local councils compete to be as obstructive as possible to new building schemes big and small. We're pretty new to tower-blocks in London (for long the rule was nothing taller than St Pauls and anyway the bedrock doesn't really suit tower blocks). Basically the supply of housing in this area is static. The we boost demand. We do it through immigration (which is mostly into London and the SE), willingness of banks to lend to buy (and they are now being encouraged to lend) and through the impact of London as a global financial centre. Add the Olympics and the demand gets a bit higher. In this situation the likelihood is that prices will go still higher. Indeed they are now going up and fast. This is only a bubble if the fundamentals are wrong and cannot justify the prices. I just don't see it. If we changed planning regulations today it would be at least 2-3 years to get planning permission through and build - and anyway we're not going to do this. The supply just isn't there. And while there is now talk of some modest restriction on immigration this is not going to be a big factor. Indeed as the City forges ahead driving the UK economy we are going to bring still more people into London and the SE. Now of course there will be investors and speculators who see that the fundamentals are driving the market up and go for risky borrowing to fund purchase of property on the basis that it will always go up. This froth will distort the market. At the top of the boom it will overshoot. In this limited sense there will be a bubble. We need to ensure that at the top of the boom the market has a soft landing - and that means we have to regulate just how much our banks can lend. We had a property bust in the early 1990s and have had a couple of years of stagnation now, but with the exception of the early 1990s we have been able to avoid major overshoots. It shouldn't be all that difficult. My feel is that we are looking at 5 years of double digit property price inflation in London and the SE (proably less elsewhere). By the time Cameron's goes to the country in 2015 prices will be maybe 75%+ up on their present levels. Right now London is the third most expensive city in the world (after Moscow and Tokyo). Maybe it will be first. This is going to do ghastly things to our society. The idea 1950-2003 or thereabouts was that it was reasonable for people to aspire to own their own home. We had the rule of thumb of borrowing 3x salary, and someone on a modest salary could save a modest deposit and find a modest home in their price range. Now that is just unthinkable. In London and the SE it is now very hard to buy anything without an inheritance or some form of windfall. We have a social divide that we haven't seen for a couple of generations. We have lots of people in their 20s and 30s who have so much to offer and are feeling increasingly alienated.