Rarely a week goes by without the TV news reporting that house prices in the UK are at ‘an all time high’. And rarely does a week go by without newspapers like the Daily Mail running stories about how rising interest rates are going to negatively affect house prices and end up bankrupting half the country. In the popular press, if house prices are rising it is a case of ‘feel the wealth’; if there is a sense they might decline it is ‘fear for the future’ instead. You could be forgiven for thinking that the health of the entire economy rested on rising house prices.

In a sane society, of course, houses and other buildings would be wanted simply as desirable places to live in rather than as supposed generators of wealth, and it is tempting to suggest that an economy based on house prices can only come about because the generation of real wealth through industry must no longer be an attractive or viable proposition. Though superficially appealing, this would be wrong. The sphere of production is where real wealth is created, not in the realm of buying and selling houses or anything else. The inherently cyclical nature of the market economy and the various sectors within it (not all of which move in the same direction at once) means that throughout the history of capitalism ‘bubbles’ have developed in everything from tulip bulbs to micro-chips, based on periodic excess demand, speculation, and the psychological momentum which develops when people perceive that particular assets or commodities are increasing in value.

Since the 1970s and 80s, the way people view housing in the UK (and many other countries too) has changed. In capitalism’s ‘property-owning democracy’ houses are seen as a store of wealth and those buying them are encouraged by an entire industry of property firms, banks, building societies and estate agents to pin their faith on ever-higher house prices. That this is peculiar never occurs to most, but it is one of the strangest facets of the modern economy. What other commodity, when subject to massive price rises, garners such a positive response – rising car prices, food, or furniture? Only houses – and precisely because, in a society where over half of all households have less than £1,500 in savings, they are now seen as the main store of wealth and, ultimately, as an investment.

Rising prices are nearly always seen as being bad, except when it comes to house prices – indeed, with annual house price increases often running between 10 and 20 per cent in recent years, this has been viewed as especially good. What makes it odd is that a house is the single biggest thing most people ever purchase, and in a great many cases it eats up a higher proportion of income than all other expenditure put together, which is one reason why falling house prices are not the one-sided disaster usually supposed (at least not for buyers).

Importantly, houses are evidently not a source of wealth for most people with huge mortgages to pay – they are a source of debt. Average household debt in the UK is currently around £45,000 and four-fifths of this is accounted for by mortgage debt. There is widespread confusion about the extent of debt involved in buying a house too, as the powers of compound interest are not always apparent – few with a typical 25-year £120,000 mortgage will realise that even at current (comparatively low) interest rates they will be paying back a total of around £270,000 in today’s money.