When the stock market goes up 10% that is a good thing. When house prices go up 5% that is also good. However if the Consumer Price Index (CPI) or Retail Price Index (RPI) go up 3% that is a bad thing. The asymmetry in our view of asset prices and goods and services is one that has long fascinated me.

The sliced and diced and packaged sub-prime mortgage debt has been a major part of the financial crisis since 2007. When the UK housing bubble burst in the late 80s it took at least 10 years to get back to the same price levels.

The UK has for over 30 years failed to build enough houses and the necessary supporting infrastructure. The recent growth in prices has been simultaneously heralded as a return of confidence by the Government and the Housing industry while Fitch and Vince Cable among others have warned over a property bubble. We are seeing a return of growth in buy-to-let mortgages as in the mid-2000s, against a national shortage of housing. This is largely being driven by the poor returns elsewhere in the economy.

The historical evidence is that when property prices are more than 4 times salaries, then this proves unsustainable in the long term. Yet today the house prices are nearly 5 times salaries across the UK and over 6 in some parts of the South East.

One impact of Quantitative Easing is that asset prices have been maintained in a way that was not true in the late 80s. It is generally considered that housing is 10-20% above the long-term levels. So how can growth in prices be a good thing?

The old adage was that the Job of a Central Banker was to take away the punch bowl, just as the party was getting going.

The introduction of Forward Guidance by Mark Carney and the Bank of England has been generally welcomed and the debate over its meaning has given some substance to news in what is normally the silly season.

So, if we know that high property prices are evidence of future trouble, would it not be good if house price inflation was included within the guidance? If, for instance, interest rate guidance included a future view of housing prices with an aim of capping prices at 5 times salary, would this not divert investment towards more productive parts of the economy and stop later irrational exuberance?

Signalling that interest rates will rise if property prices get out of hand would help first time buyers and bring some stability to the market.

The main argument in the media against the notion that we are in a property bubble is that volumes of transactions remain historically low. That is certainly the case. However, bubbles are driven by value and volume. The top of the bubble is when volumes and values are both out of kilter with the real economy. I would argue that we are in a value bubble, but not yet a volume bubble.

Much store is being made in the idea of a rebalanced economy, yet I argue that we are seeing the seeds of the next crisis already. When interest rates return to more normal rates be that 2-10 years’ time, the prospect of negative equity already looks ( to me) worse than the late 80s early 90s.

Returning to the buy to let market, the government’s welfare reforms are showing signs of reducing rental yields at the low end of the market. If rental yields increase in the higher portion of the market then it makes home ownership more attractive. Hence future price rises and a risk of a rush to buy. So the danger for new buy-to–let entrants with high deposits is that their capital is at risk as rental yields are under pressure. For first time buyers, the prospect of higher interest and stagnating or falling asset prices will be the challenge that many of us experienced at the end of the 80s.

Future guidance is far from fool proof and prone to be driven by events. What I welcome is that it has led to a shift in the terms of debate to the wider economy, not just interest rates. The focus on employment levels is an important step. If we add house prices, then maybe the party will be a bit duller, but the aftermath may be less of a train wreck.

One important part of futures work, especially scenarios, is to get away from the notion of “the future” and to create a range of plausible possible futures. Within these scenarios the key is to understand what is dependent on a specific view of the future and what is independent of, or common to, the range of possible futures.

With the availability of official forward guidance, if built into a range of scenarios, the underlying assumptions as to why some see a bubble when others do not could be surfaced and tested.

The debate over when employment levels will fall to 7%, and hence interest rates may be ready to be raised illustrates this point. Some are arguing that interest rates may rise sooner than expected, because the rate may be hit earlier as the economy lifts. Yet plausibly, with 1 million people on zero-hours contracts and more than that underemployed, wanting to work more hours, it is feasible for the economy to return to “normal growth rates”, without unemployment falling at all.

For me, the value of forward guidance is not that it is perfect or will predict the future, it won’t. What it can do is enrich the debate over sustainable growth and a rebalanced economy. That can only be healthy.

Now, where’s the punch bowl?