Leading article: Property booms and busts

Falling house prices, to which we must now suddenly become accustomed after a decade which has seen property values treble, are usually taken to be "a bad thing". And, indeed, conventional economic analysis suggests that there are plenty of reasons to worry.

First, it cannot be a comforting feeling to watch the value of what is for the vast majority of people their main financial asset decline, however modestly. Those who have bought property on the back of speculative buy-to-let bubbles, and those who are counting on their house as their primary means of securing a decent retirement income, will be especially perturbed by today's news from the Nationwide Building Society that the average British home is worth 0.5 per cent less this month than last. Second, although economists disagree, as ever, about the extent to which fluctuations in house prices have an impact on people's livelihoods and spending patterns, it is surely not the sort of thing that will bolster confidence. That new Honda Civic may have to wait, and the jobs of those who make the cars in Swindon will be that little bit less secure. Not good.

However, that may only be half of the story. The UK property market, with its greater speculative content and easy credit excesses, may be developing into what the financial community would call "just another asset class". In other words, householders may have to become a little more used to the idea of more volatility in the value of their homes. They might also reflect that the nation has lived through property recessions before in the mid 1970s (during which time inflation masked the extent of the fall in real property values), and, still painfully remembered for its negative equity and record repossessions, that of the early 1990s. Although residential property, of its nature, will never see the same wild fluctuations as foreign exchange or share markets display, it could easily be much more of a roller-coaster ride in the future.

Another part of the story is to see decline in house prices as a benevolent social phenomenon. For while the effects on the wider economy may well be baleful, for those looking for their first home, a reduction in house prices coupled with a decline in mortgage rates, both on the cards for 2008, means that that starter home may just hove into reach and that is a good thing.