I'm still surprised by people's optimism when it comes to house prices. A lot of investors have jumped at the chance to buy property at a 20% reduction from the top thinking that a bottom is in sight. Government figures suggest prices are on the increase and sales are up (which is true of every summer incidentally).

If you look at a chart of house prices, you notice that under normal circumstances, prices rise roughly with inflation, as people maintain the prices and banks lend with a fairly con...