William Kay: King needs that Goldilocks touch to keep housing market 'just right'

It is a rich irony that, while more and more people are looking to the value of their homes to get them out of debt and give them a pension, we now know less than a jar of fresh air about what is going to happen to house prices.

This week Tony Dye, a discredited analyst who basks in the nickname Dr Doom, predicted that house prices would fall by 30 per cent. He was backed by Andrew Oswald, professor of economics at Warwick University, and Gavin Cameron, research fellow in economics at Nuffield College, Oxford.

These views are widely at odds with Halifax bank and Nationwide building society, which have had to upgrade their forecasts for this year from a rise of less than 10 per cent to a gain of around 20 per cent, similar to the 2003 outcome.

This range of forecasts means that a £200,000 property could be worth anything from £140,000 to £240,000. Thanks, guys.

As a poll for The Independent showed this week, most pundits lean towards the optimistic end of the scale. Many are too closely involved in the housing market, either as estate agents, surveyors or lenders, to be objective. But the most worrying view for house owners - and therefore the most cheerful from the view of would-be buyers - is arguably the high priest of finance, Mervyn King, governor of the Bank of England. The Bank's view for some time has been that house price rises will slow down to the point where they reach standstill. As chairman of the Bank's Monetary Policy Committee, responsible for setting UK interest rates, Mr King can do more than most to ensure his prediction comes true.

If zero house price inflation is likely, we then move into views about how markets behave. I do not believe that market-driven prices are neat and tidy, and while zero is a nice, round number prices are no more likely to stand still than they are to grow or shrink at a steady 10 per cent.

If Mr King's forecast is correct, the corresponding transfer of power from house sellers to buyers will almost certainly spark a collapse and falling prices. How far and how fast will be very difficult to predict, because it will be inherently volatile, as it was in the early 1990s.

It could be that Mr King's forecast is slightly too grim and we simply see a slowdown to house price rises of around 5 per cent, much in the same way that overall retail price inflation has declined from peaks of over 20 per cent a year. That will be much more benign, even for home buyers. What they will lose in terms of prices staying higher than in a crash will be compensated for by greater stability. This should mean a greater supply of properties onto the market, and a more relaxed stance on the part of lenders.

This is the so-called Goldilocks scenario, whereby the housing market becomes not too hot, not too cold, but just right. The trouble is, it rarely happens. Greed and fear tend to yank prices about more roughly than that, which is why so much responsibility rests on Mr King's shoulders to ensure that interest rates rise neither too quickly nor too slowly.

Buy-to-lent popular with women

The London letting agent Ludlowthompson.com says that buy-to-let is becoming more popular with women, although it is not sure whether this is a result of fury at the lousy pension deal women get or their desire to emulate the TV programme Changing Rooms by having a property to do up. I hope it is the latter, for rage is not enough for buy-to-let. Conversely, the buy-to-let investors who tend to be most successful are those who take a direct interest in their properties, even if they do not decorate and maintain them themselves. Unlike shares, where investors pay a board of directors to manage the business, the ultimate responsibility lies with the investor. And that may be where women score.

Admit it: pensions flummox the best

IT IS cheering to find that our alleged betters can be as perplexed as the rest of us about life's little teasers. If any old Joe had been made chairman of the Pensions Commission and admitted defeat, people would have said the job was beyond him and he should be sacked.

But Adair Turner is by no means any old Joe. A graduate of Cambridge and McKinsey, he has been director-general of the Confederation of British Industry, has graced many a council or task force. Yet he confessed this week that, after a year as chairman of the Pensions Commission, every few weeks he needs two-hour refresher sessions on some aspect of pensions. "How is the ordinary person to make sensible decisions about pension provision?" he pleads.

As the job plainly cannot be beyond someone of Mr Turner's calibre, this means pensions are too complicated. Hooray for that, now the politicians might believe those who have to grapple with these conundrums. This might sufficiently impress Andrew Smith, the pensions secretary, into doing something.

Ah, he will reply, we have introduced a Pensions Bill to reduce eight regimes to just one. True, but not enough. The Victorian fiction of tying the state pension to National Insurance contributions should be abolished, and the basic and second state pensions should be amalgamated into one payment - for a start.