At last, a compelling piece of analysis that should give pause to every banker and estate agent who insists house prices won't fall. The conventional wisdom from economists is that, thanks to low interest rates and low unemployment, the housing boom will gently fizzle out with no casualties. House-price growth will slow to zero and then mark time for a few years while wages catch up, before resuming its upward path.
But David Pannell, research director with the investment bank Durlacher, argues that house prices are heading for a collapse of 30 per cent, that the home-loan industry is about to be immersed in a fresh mis-selling scandal (this time centred on self-certified mortgages) and that some of the racier lending institutions, such as the Bradford & Bingley, will be lucky to survive. Pannell argues that prices have overshot on the way up and will overshoot on the way down.
The soft landers point to their reassuring formulae - for example, loan-to-income ratios which show that borrowers aren't overstretching themselves. Pannell points to anecdotal evidence that the industry is encouraging borrowers to fib about income to secure loans. The soft landers point to the shortage of housing and the difficult planning rules that restrict supply. Pannell points to the army of people who have bought second homes as an investment - the buy-to-let brigade, who see homes as being no different from shares and will all stampede to sell out at the top of the market. He also lays into the reality TV shows that propagate the delusion that property is an automatic route to riches and have helped spawn thousands of naive amateur landlords.
Durlacher knows about bubbles. It was the erstwhile minnow that grew to within a whisker of entry to the Footsie - the club of Britain's 100 biggest companies - during the dotcom boom, and all but went bust on the way down.
I took my sons the other day to see Lord of the Rings 3 and one of them wanted popcorn. Dad proceeds to the snacks counter to request one child's portion. Smiley assistant prepares to fill what can only be described as a huge cardboard cauldron big enough to house a hobbit. Dad horrified. Assistant insists this is the smallest portion they do. Dad even more horrified when told the price (£3.50). Dad lectures assistant on child obesity pandemic and demands that the bucket be only half filled for half the price. Assistant, not quite so smiley now, refuses. Dad asks to speak to manager. Sons squirm beneath counter. Manager appears, shrugs and eventually offers an ordinary small cupful of popcorn, gratis.
Perhaps not an encounter of Orcs v Elves proportions, but a small moral victory. Yet how is it that the cinema chain Warner Village, the biggest multiplex operator in the country, could come up with a portion system so crass and indifferent to public concerns? Do its people never read the papers or hear a news bulletin? On PR grounds alone, they might have hesitated before inflicting on an eight-year-old enough sugar-coated junk to sate a troll. I put this to Warner's PR adviser, the splendidly named Mr Ruse. Yes, he said, Warner was sorry. No, it had no plans to change its portion policy. And - this is the most cynical bit - James could have had a smaller portion; he just had to order a fizzy drink as well.
Interestingly, Warner Village - which is changing its name to Vue - is no longer part of the Time Warner empire, the world's biggest media group. It is owned by an unquoted private equity consortium - the species of business most indifferent to public opinion. But for the record, the ultimate shareholders are Lloyds TSB and Legal & General. Named and, I hope, a tiny bit shamed.
As I predicted two weeks ago, the run of banks reporting record profits has produced the usual accusations of profiteering. These in turn have provoked some commentators to defend the banks. Profits, they argue, are reinvested in the business and pay dividends, which help finance millions of pensions. They also bankroll the government. The Royal Bank of Scotland reckons it's the biggest taxpayer in the UK, contributing enough to run the entire Foreign Office.
I buy most of this. The problem isn't profits per se, but how they are earned. Profits earned through the monopolistic payments system, through other anti-competitive practices and through misleading terms and conditions are nothing to be proud of. I also draw the line at the notion that banks are innovative global champions, bringing British best practice to the rest of the world, like Victorian missionaries. As Rolls-Royce delivers its first Trent 900 aero-engine, an awesome piece of British technology that will help the 800-seater, double-deck Airbus A380 into the air, RBS and its peers still have a way to go.
Patrick Hosking is deputy City editor of the London Evening Standard
