Can UK property avoid American humble pie?

The recent crash in the US property market has led to speculation that the same could happen here, a situation which would have severe consequences for homeowners and buy-to-let landlords alike. It is an oft-repeated mantra that "when America sneezes, Britain catches a cold", which assumes economic conditions on the other side of the Atlantic will soon impact on Britain.

In macroeconomic terms, this has some validity, given the size of the US economy and its overseas markets, including Europe as a whole and the UK in particular. But the specifics of the housing market may show different dynamics in each country.

The point has been made most forcibly this week by a man who should know - Bank of England governor Mervyn King. As someone with reams of economic data at his fingertips and an awareness of how overseas and international conditions can affect the economy, he suggests Britain is unlikely to suffer the way America's sub-prime market has.

For one thing, he told the House of Commons treasury select committee, mortgage holders were in a better situation in regard to the value of their houses now in terms of being able to withstand a market correction.

He said: "If house prices were to fall by a relatively modest amount, then I don't think the consequences would be very severe because there would only be a relatively small number of households in negative equity."

Such a view, of course, reflects the position of a man who presides over Britain's interest rate-setting body, which might be expected to quickly reduce rates if the market appeared about to crash, rather than the apparent slight slowdown suggested by figures such as the statistics of this week's Nationwide housing survey.

Mr King is not alone in the view that Britain has a robust property market capable of staying strong.

Earlier this month the BBC quizzed two experts holding opposing views on the future of the market.

Chartered Financial Planner Jonathan Davis of the HousePriceCrash website, said that the American market was driven up by the buy-to-let sector, who were then responsible for driving it down.

"This is likely to happen in the UK," he claimed, arguing that supply will soon exceed demand, if it hasn't started to do so already.

That view was contradicted by economist Jonathan Said from the Centre for Economics and Business Research, who said demographic and building trends would continue to make the UK market crash-proof.

He pointed out as evidence of this that 2005 saw 193,000 new homes built, the highest number in 15 years, but still only 75 per cent of the number required to lower house price inflation to one per cent.

"To induce a crash would require far higher levels of construction," Mr Said pointed out, adding that immigration and lower household sizes are also pushing up demand.

In such circumstances, of course, it might be reasonable to assume that the buy-to-let boom is safe alongside the housing market as a whole. After all, if house price demand continues not to be met, the demand for rented property will remain.