Once again, talk of whether house prices will crash has hit the mass media. Recently, Newsnight ran a disappointing debate on the topic. Unfortunately, it was subjected to the usual superficial coverage that is the BBC’s wont. It’s funny really. The BBC is supposed to offer balanced coverage, and yet it gives the debate on the future of house prices lip service, but talks up prices several times a day with its glut of programmes on the property market.

On Sunday, The Sunday Times’s economic editor David Smith, also took an optimistic slant on the topic, concluding that house prices: “will slow going into next year but not collapse.” He said: “The bank, with its tougher language, is getting things back under control. House prices have always been at their most vulnerable when the authorities have lost control of monetary policy.”

Meanwhile, yesterday, the Telegraph business section led with details on a report from Lehman Brothers. It quoted Alan Castle, Lehman’s senior UK economist, as saying: “Real house prices are probably 15 per cent above fair value, compared to 40 per cent overvaluation in the early ’90s.”

Meanwhile Hometrack has said that there is evidence the market is at last slowing. Richard Donnell, director of research at Hometrack, said: “The steady ratcheting up of interest rates was bound to take its toll eventually.”

But it seems that all these reports, overlook key points.

For one thing, 70 per cent of mortgages taken out over the last couple of years have been fixed. Typically, they are fixed for two to three years, so the real pain of the recent rate of interest rises won’t be felt for some time.

It’s perhaps no surprise then, that the reaction to rising rates has been somewhat muted to date. The real key lies in what the rate of interest does over the next two years.

Another point relates to the future prognosis of interest rates. Incredibly, David Smith said the Bank of England is getting monetary policy under control. In reality, the money supply is continuing to expand too fast, oil is remaining way above the levels analysts have predicted it would fall to, and now there is talk that the price of corn is set to rise, thanks to its possible use as bio fuel.

But perhaps, for the key factor that determines these things, we must turn our attention to China. As you know cheap imports from China have been one of the main factors keeping a lid on inflation. This, in turn, has enabled the low interest rates of recent years.

But, right now, on the other side of the Great Wall, inflation is picking up. The Chinese government might well eventually accede to US demands and allow the yuan to appreciate. US politicians currently say the Chinese currency is 40 per cent too low. So what would happen if the yuan rose anything like 40 per cent? Answer: inflation in the west would soar. On the other hand, if China keeps its currency down, inflation will rise in China and will, in any case, lead to higher prices in the west.

Mr Smith used his Sunday Times column to argue the Bank of England was getting monetary policy under control. The truth is, in this day and age, thanks to the forces of globalisation, central banks have about as much control over monetary policy and inflation as cows do over their methane emissions.

In recent years, the forces of globalisation have led to low interest rates, thereby feeding house price inflation that no-one expected.

It seems that moving forward, those same forces could just as easily force the opposite to occur.

© Investment & Business News 2013