LONDON BRIEFING: It is hard to see why property prices should crash unless interest rates and/or unemployment shoot up and at present neither seems on the cards, writes Chris Johns.

Whenever anybody talks about the UK property market (which happens a lot these days) the word "bubble" is quickly mentioned. Everybody is convinced that house prices are reaching unsustainable levels and that a crash is only a matter of time. This has all sorts of consequences, not least for bank share prices and the setting of interest rates by the Bank of England.

British bank share prices have been depressed in part because of the worries that a property crash will result in mortgage holders defaulting on their debts. The Bank of England keeps interest high to avoid further rises in house prices but frets that a property crash will de-rail the economy and cause a recession.

In one way or another, everybody is affected by worries over house prices. I have met lots of institutional investors nervous about putting money into the UK stock market because of the economy-wide consequences of a property crash. UK manufacturing industry, badly in need of help, could do with a monetary boost. It won't get one.

Economists warn that anyone who takes on more debt because of lower interest rates is kidding themselves. Nominal monthly repayments might seem lower but, in the long-term, the real burden of debt takes much longer to work off because mortgage holders are no longer bailed out by higher inflation.

A £1 of debt today is going to be worth a £1, more-or-less, tomorrow. In the bad old days of high inflation, the real value of mortgages fell rapidly. Put another way, it is as logical to expect house prices to receive a sustainable uplift from lower interest rates as it is to expect banana prices to move permanently up when interest rates fall.

I have two (at least) problems with this. First, a sort of philosophical question. If everybody - and I do mean everybody - believes that house prices are going to fall, why do they keep going up? How can you have a bubble when every commentator, media pundit and pub know-it-all is forecasting the inevitability of a crash?

As Alan Greenspan, chairman of the US Federal Reserve, said about share prices, you surely can only know you are in a bubble after the event. Bubble spotters beware; there is something very illogical about the certainty of your beliefs.

Second, higher prices might not just be about lower interest rates. We borrow more because we can. We always wanted to take on more debt in the past, but for all sorts of strange reasons, we couldn't. My first mortgage involved a lot of bowing and scraping to the local building society manager - and I had to wait a long time because credit was rationed.

Nowadays of course, building societies don't have managers, just people in call centres who actively try to sell mortgages. In the old days, banks didn't get involved in mortgage lending at all. These days that is all that some of them do.

If a shortage of credit restricted borrowing in the past then there may be something far more sustainable about the house price bubble than people think (the same arguments apply to the Irish housing bubble which, if memory serves, was widely expected to burst a long time ago). In any event, it is hard to see why property prices should crash unless interest rates and/or unemployment shoot up. Neither looks likely.

None of this is to deny that house prices are a major issue. House prices could fall - but not crash - over the next year or two. People on average incomes struggle to find affordable housing in London. But it seems that this is true of many major cities in most growing economies. Only in Germany and Japan do we find people not terribly concerned about house prices.

Since share prices crashed, many people have been concerned to spot the next bubble. The British media are convinced that they know where the next crash is coming from. In my view, the main reasons why house prices go up most of the time is simply the opposite of the factors that drive computer prices ever lower. PC prices fall because they are largely made of plastic, sand and a few other components that are in abundant supply and cost next to nothing to make. Manufacturers continuously find ways to make more PCs at ever-lower cost.

Houses, by contrast, require a basic commodity that is simply not made any more. That commodity is, of course, land. Until we figure out how to make more of that stuff and for as long as we have economies that grow we will see upward pressure on real house prices.

Chris Johns is chief strategist with ABN AMRO Securities, London. All opinions expressed are entirely personal.