Osborne Should Heed IMF House Market Warning
What would you like first: the good news or the bad?
Well, if you're George Osborne, the good news is that the long battle with the International Monetary Fund - the one that began last year when chief economist Olivier Blanchard told Sky News the Chancellor was "playing with fire" on economic policy - is over.
We knew as much in Washington earlier this spring, when Blanchard acknowledged that the Fund's forecasts for Britain had been overly pessimistic.
But today the saga has come to its end, with the Fund also giving the Chancellor's fiscal plans (those precise plans Blanchard had criticised) a ringing endorsement.
"The planned fiscal adjustment this year is appropriate," the IMF says in its annual survey of the UK economy - the so-called Article IV report.
This is a shift from last year, when the Article IV recommended that the Chancellor bring forward spending plans to try to boost the economy. So cause for celebration at the Treasury?
Not altogether, for there is also some bad news. The criticisms of the Treasury's tax-and-spend plans may have dissolved away, but they have been replaced with concerns of another variety: about the housing market.
Such concerns are hardly new: the European Commission already recommended earlier this week that the Government take action to prevent a housing bubble.
However, the Fund is a touch more authoritative - and more specific. Its suggestions are as follows: The Bank of England should leave interest rates on hold for the time being; it should impose limits on how much mortgage companies can lend homebuyers in relation to their incomes; it should also consider outright caps on loan-to-income levels and loan-to-value ratios.
On top of this, the Government should "consider whether [Help to Buy] should be modified or even remains necessary for the full three years of the policy. And as the volume of high-LTV transactions rises, the FPC will need to evaluate if the program is contributing to financial risks."
Like the Commission (and, well, every economist out there), it suggests that Britain needs to build more homes. However, there are no silver bullets in this enterprise, and it acknowledges that all of the above "can only be temporary palliatives to an underlying problem."
The best it can suggest is that the Government reconsider "unnecessary constraints on brownfield and greenfield developments; tax policies that discourage the most economically-efficient use of property; and underdeveloped rental markets with relatively short lease terms."
Some might see the final point as a note of support for the rental reforms recently suggested by Ed Miliband. The problem for politicians of every stripe is that the housing market's structural problems are no secret: but mending them will take many years.
Reforms to the planning system have been desperately needed for decades, but only now are they being implemented; changes to green belt regulations are an economist's dream but a local politician's nightmare - so are unlikely to be implemented before the election, if at all.
However, it is clear that the Chancellor would be foolhardy to ignore the tone of the IMF's report. For there is a growing risk of a housing bubble, and with it the political risk that George Osborne could be remembered not as the austerity Chancellor who got it right, but the man who generated yet another housing market bust.