The latest monthly survey from the Halifax Building Society confirms the gathering storm in the housing market. Average UK house prices fell by 1.7 per cent in July. This took the decline over the past year to 11 per cent. House prices are falling at their fastest rate since 1992.

There is in economic reporting a convention that falling house prices are treated as gloomy portents. Falling prices of other commodities - say, food or oil - are, on the other hand, treated as good news. Similarly, interest rate rises are treated as bad news; interest rate cuts are cause for celebration. There is little logic to these conventions. There are gainers and losers in any change in market prices, including the price of credit.

Falls in house prices will be dispiriting news to those whose savings are invested in the property market. But for the economy as a whole, there are countervailing benefits in the deflation of this asset price bubble. It is worth being clear on what these are, and how they might best be entrenched. The periodic booms and busts of the housing market over the past two decades have aggravated the volatility of the business cycle. There must be a more rational way of making the housing market work.

One of the costs of the boom in house prices since 1997 has been the encouragement that it has given to imprudent borrowing. Because homeowners do not pay capital gains tax on their main residence, they have the prospect of a tax-free return merely by buying the biggest house they can afford. On the assumption that house prices are a one-way bet, they have typically borrowed as much as they can and sunk it into property. By leveraging up their investment, they have enjoyed spectacular notional returns. At the extreme, some borrowers have invested in property with no deposit at all, and even with 125 per cent mortgages.

This is bad for the economy and also bad personal investment strategy. Investment in houses has come to enjoy a mystique - and a cottage industry in television programmes about home improvement - that investing in equities and bonds did not possess even at the height of the dotcom mania. Unlike companies that make things or provide services, houses are not productive. The cult of home ownership has encouraged many investors to ignore the benefits of diversification and overlook the risks of investing in a single asset class.

If we are now set for a prolonged period of modest, or negative, returns from housing, then this should encourage a more rational allocation of household wealth. People will think more seriously about the attractions of renting rather than owning their home. With a larger and more active rental sector of the housing market, people will be freer to move home in order to take up attractive new jobs for which they are suited. There will consequently be fewer people who commute long distances to work. That will lessen the burden to them, and reduce the costs to the environment.

Those who have invested heavily in property have not been “greedy”: they have made rational decisions given the bias in our economy to owner-occupation. That bias has real costs, and there should be few tears if it is now passing.