Are we on the edge of another crash? The latest 2008 crunch movie, The Big Short, is an eerie sensation for Londoners. In the last quarter, prices in prime central London property (PCL) have started to slide. Sales of those over £5 million are down by a quarter to a half. Hundreds of off-plan luxury sales are being returned before completion. The consultants Property Vision calculate that 54,000 flats priced at more than £1 million are coming to market in the next two years, thanks largely to Mayor Boris Johnson’s tower block free-for-all. Such flats currently have 3,900 buyers a year. This must mean trouble.

As in the movie, we assume there is a nerd in a Shoreditch attic peering into his screen and muttering: “Oh my God, it’s all moving down.” Estate agency “researchers” frantically hype the market, pleading with vendors not to slash prices. Policy-makers and regulators take no notice. They are all the herd. That is how the bubble fills to bursting.

All my life I have endured London’s most tedious dinner topic: “Do you know what my house was/is worth?” My head crashes into my plate at another wail: “My children simply can’t afford to live anywhere near us.” I tend to give the macho reply: “If they can’t take the heat, get out of town”. There are plenty who can.

Reading the London property market is an art not a science but a little history helps. London house prices have always been “high” when the city booms. According to Savills, mainstream (non-prime) London prices have risen since the crash by just three per cent a year in real terms. That is slower than New York, Tokyo, San Francisco, Sydney and Stockholm. This suggests London will see no “big short”, like the negative equity of the Nineties.

On the other hand, there are now two markets. The luxury one is clearly heading for a crash, engineered by George Osborne and Boris Johnson, consultants in chaos to the London rich. They have turned London’s multi-million pound properties into a global reserve currency — they call it “growth” — seizing an estimated £8 billion of residential London property and rendering it unused and economically inert.

Johnson’s claim that “buy-to-leave” is inward investment suggests the need for an economics degree. This mostly laundered money has merely bought a flat. Most buyers do not live, work or spend in London. This same market has coated parts of London in hideous blocks and towers, such as those along the South Bank. London’s truly residential rich want to live in town houses, not somewhere like a Moscow suburb.

This market has nothing to do with London’s “housing need”. Only after the crash, when many of these high-maintenance gated estates will slither downmarket, will they become new slums and serve at least some purpose. In what appears to be the work of a guilty conscience, Osborne is set to help this on its way by pricking the bubble with a swingeing new stamp duty. If a smooth Singaporean had just sold me a Thamesside two-bedder off-plan, I would sell it quick and buy something safe, such a oil shares.

Meanwhile London’s so-called mainstream housing market should handle a downturn better. Osborne’s various deposit and mortgage subsidies — classic “wealthfare” spending — will help underpin prices. Banks are keeping tight control on their loan terms, leaving little scope for the “sub-prime” and “liar lending” that caused the last bubble to burst.

More to the point, whatever the media’s “crisis” hysteria says, buying a London property has seldom been so affordable. I bought my first studio flat in the Seventies and it cost four times my starter salary. The 85 per cent mortgage cost 17 per cent. It consumed 40 per cent of my income and was crippling. That same job today also buys a studio flat at the same multiple. But the mortgage is four per cent, which consumes a mere 15 per cent of income.

The Council of Mortgage Lenders’ index has London’s average mortgage interest in 1990 consuming 30 per cent of average income. That is 10 per cent today. Yes, the deposit is bigger and payment may take longer, but no one can say London property is less affordable to buy.

The difference between my experience and the same studio today is its location, no longer in Camden but in points east and south — though still in Zone 1. The great London house-price conversation has never been about money but about class.

'By restricting the supply of lettings, the Government will simply raise rents for the 300,000 newcomers each year who really do want to live and work in London' Simon Jenkins

The question is whether Osborne and Johnson will continue to shift properties from the home and mainstream market into the luxury and foreign. Even now, Johnson is backing the maddest rich-man’s project in Europe, Irvine Sellar’s desire for a “Paddington Pole” to tower the height of the Shard over Maida Vale. Apart from its visual outrage, it will contain just 330 (doubtless empty) flats, on what was publicly owned land where double or treble that number of low-rise properties could be built. The project is to do with nothing but vanity.

London’s best hope for more and cheaper houses has always lain in making the best use of the land and buildings it already has. It has the lowest residential densities of any big European city. That is why it makes no sense for Osborne to clamp down on the most efficient housing sector — private renting or buy-to-let.

Buy-to-let is better than buy-to-leave. Its houses make money by being lived in, not left empty. In much of London, renting is all there is for immigrants and the poor, who cannot access social housing. By restricting the supply of lettings, the Government will simply raise rents for the 300,000 newcomers each year who really do want to live and work in London.

Big short or not, the metropolis will be left with the monsters, scars and bruises of its latest battle with the demons of politics. A few rich will lose their shirts. The poor will be poorer. The city for sure will be uglier.