During the point of maximum market turmoil earlier this month, the Daily Mail reassured us all. The UK property market is not like the US market: there has been no boom in building and so there will be no UK property market crisis, it suggested.

And yet many, including the IMF, ABN Amro and Fitch, have warned that the UK is more vulnerable to a property market slowdown than the US.

The Nationwide now predicts house price rises of 2 to 4 per cent this year, Home track is forecasting 1 to 2 per cent, and Rightmove pinpointed a 0.1 per cent fall in house prices in London.

The City suffers from financial turmoil. According to Challenger, Gray and Christmas – a consultancy firm – there have been 90,000 job loses in financial services this year. We all know how reliant the UK is on business services these days, in fact the latest data from the Office of National Statistics says this sector now makes up a third of the economy.

Recently the FT headlined that US sub prime problems could hit London property.

And then there’s buy to let. The FT has calculated that the average gross on a property is now 5 per cent, but after costs such as maintenance and voids, net yields are just 3.5 per cent.

This is significant for more than one reason. First it highlights the danger of buy to let landlords selling property and secondly the modest level of rent suggests the massive demand from immigrants for our homes is not as great as had been warned. Demand outstripping supply is supposed to mean house prices will carry on rising, but if this is so, why is rental inflation so modest?

The most telling data came from the Council of Mortgage Lenders.

Re-mortgaging lending has reached a new record for June – at £34.4 bn it was 13 per cent up on a year earlier. And yet according to the Building Societies Association, mortgage approvals fell in July.

In other words, people are still using value tied up in their property to fund their expenditure – maybe even their debt repayments.

This means the danger that demand will continue to be greater than supply remains, inflation pressures remain, and the Bank of England may not be able to lower rates after all.

But sooner or later, and sooner especially if the credit crunch spreads, people won’t be able to just keep on using high asset prices as a way to prop up their spending.

Right now, the UK property market is in a great deal of danger, and as of now, this danger has been largely ignored.

Newfangled CDOs hide the true extent of exposure among lenders. These devices ignore the old fashioned danger of falling asset prices: if our houses fall in value, our debt-to-wealth ratios hit new and unsustainable levels across the board.
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