Industry calls to limit lending won't fix our bust housing system

It's never encouraging when industry insiders fear that their own sector is overheating. That's the subtext from the Royal Institution of Chartered Surveyors (RICS), who've called on our central bank to cap annual house price inflation at five per cent.

RICS suggest that the Bank of England should intervene, and attempt to curb lending in order to avoid a future housing boom and a "dangerous build-up in household debt".

Our faulty housing market is certainly threatening - but capping prices won't ease the pressure in the housing sector, yet that's what RICS are calling for:

Sending a clear and simple statement to the public that the Bank of England will not tolerate house price rises above 5% would help restrict excessive price expectations across the country.

Cap prices, and you'll see queues for homes lengthen, as price signals to builders cease to function.

If we had a functioning market in housing, those rising house prices would signal to developers that there is a need for new housing stock. Tight planning rules prevent them from responding.

Neither longer queues for homes or sectoral bubbles caused by pumped up demand are attractive options. Meanwhile, only 2.27 per cent of the UK's land is built on.

The government's Funding for Lending Scheme and the first stage of Help to Buy are already inflating demand and pushing prices higher, but if builders aren't allowed to develop land then that demand has nowhere to go.

Neither fiddling with demand or fixing prices can fix our bust housing sector. What we are need are more homes, and if we implement the right supply-side reforms, there are people ready to build them.