The IPPR have published a report on housing bubbles and how to stop them, which along with a Halifax report on 'Generation Rent' has been getting a good deal of attention. I agree with most of the IPPR's analysis and recommendations (which are mostly to do with reducing price volatility), but just wanted to focus on one thing, namely their graph of the long-term trend in real (inflation-adjusted) house prices:
It's notable that after a long and deep recession and a sharp fall in house prices, and at a time of high unemployment and very restricted mortgage lending, we are still only back to the long-term trend in house price growth. The short term picture is very uncertain, but when we eventually return to falling unemployment and/or somewhat looser mortgage lending criteria, don't be surprised to see above 'trend' growth in house prices come back.
But it's also a mistake to look only at prices. As the Halifax pointed out, more and more of us are renting for longer periods, partly (but not entirely) because many who want to buy can't. And while house prices were falling, average rents have been rising in recent years (see here and DCLG's table FT3232 here). Depending on what happens to mortgage lending conditions, we might see the balance between house price rises and rent increases change, but as long as demand (see latest household growth projections here, for example) continues to outstrip supply, the long-term story will be one of rising overall housing costs.