The bleatings of distress from those lost sheep who make their living through the housing market are becoming deafening. Earlier this week, estate agents like Hambro Countrywide added their tale of woe to the Building Societies Association's diagnosis last Friday of "enduring malaise in the housing market". But is the industry speaking for homeowners - or for itself?
The latest dispatches from the war zone of Arcadia Avenue certainly offered no relief to anyone expecting an immediate upturn in the housing market. Turnover this summer is 10 per cent down on a year ago. Net advances from building societies in July were sharply down on their level last summer and mortgage lending from banks was at its lowest for nearly three years.
There is no shortage of reasons for the gloom currently enveloping the housing market. The increase in unemployment in July, while small, signals no let-up in the sense of insecurity that pervades the labour market. When jobs are at risk, people shy away from making large financial commitments.
The continuing tussle between Kenneth Clarke and Eddie George over interest rates has also undermined confidence. A lot of people remember all too well the doubling in interest rates to 15 per cent in less than 18 months at the end of the 1980s. There are still a million households whose properties are worth less than their mortgages because of the ensuing collapse in house prices. Once bitten, twice shy.
Add the further reduction this year in income tax relief on mortgage interest payments, and the depressed state of the market becomes easier to understand. No wonder the industry that lives by it is lobbying for tax breaks in the November budget.
So far, Mr Clarke has stoutly resisting these demands for special treatment. The Chancellor should continue to do so. Additional subsidies would add fuel to a recovery in house prices that is only a matter of time.
As the chart shows, houses are as affordable as they have been at any time in the past 25 years. Crucially, they are as affordable as they were in the late 1960s before investing in housing came to be seen as a surefire way to mint money.
According to the Treasury, real personal disposable income, which grew by less than 1 per cent in 1994, will be rising by 2 per cent in 1996. Add in pounds 5bn tax cuts and that could take it to 3 per cent.
Most forecasters expect the economy to pick up speed again in 1996 after the present hiatus of below-trend growth. The average projection for next year in the Treasury's latest compilation of forecasts shows the economy growing at just under 3 per cent. Provided this happens, employment growth should also pick up again, restoring some confidence to the labour market.
Perhaps most importantly, the City's perception that interest rates have peaked should start to percolate through to the public. …