I WANT to hammer home a point that we made in a piece a few weeks ago. Whenever economists talk about the British housing market (which by some measures is the world's most expensive except Monaco) they will have a simple solution to bubbly prices: build more houses. The logic is impeccable: there is high demand for housing, but not enough supply. That leads to high house prices. Increase the supply of housing, and prices will fall. Simple.

This explains why successive governments have had a housebuilding target of around 200,000-250,000 a year (in the last decade Britain has built on average about 160,000 houses a year).

I think economists' obsession with building new houses misses the point. For one, it's not immediately obvious that Britain is suffering from woefully inadequate undersupply of housing, at least at the national level. In the EU there are on average 2.3 people per private house, the same figure as found in Britain.

If overall supply is not a problem, then what is? Think about what determines house prices in a given year: the number of people who want to buy a house in that year (and the amount of money they have to spend); and the number of houses for sale in that year.

The vast majority of houses coming on to the market in a given year are not new-build ones, but already-existing houses. In fact, for the last few decades the number of second-hand houses on the market has been at least six times higher than the quantity of new-build houses coming on to the market (see chart).