I see a lot of posts from bulls stating that housing shortages are to blame for HPI. I accept that demand drives up prices but I don't see a shortage of houses for sale and nor do I know of anyone personally who does not have a home of some sort. I know there are 'homeless' people but the reasons why such people exist are complex and have little to do with the housing market.
As with all pyramid/get rich quick schemes it is expectations and greed coupled with a degree of sheep mentality that actually keeps it all going. The moment that the expectations are removed the greed for future profits will be replaced by panic driven attempts to grab what current profit still remains. BTL's will be the first properties on the market at cut prices. Landlords who only just cover the mortgage with the rent only stay in the market when it rises and are far more willing to take a drop in price to offload. Next you will have the idiots who were happy with their home when it was worth a small fortune but suddenly hate it when the value drops. Last time you heard the line 'trapped in this house I can't sell' all the time. Why did they not just see it as a home to live in. These forces do not affect any other market I can think of.

The demand is not IMO tied to supply in any way.

The supply/demand balance has nothing to do at first with HPI
HPI is driven essentially by earnings expectations.
Earnings expectations are driven by the economic environment : if unemployment keeps going down and people feel confident they will be paid more in the future, then they will be willing to commit into buying a property, even by overstretching themselves.

Afterwards, the level of IR and the sypply / demand balance can accentuate the first trend. But they do not explain it.

An example : Spain has been building 300,000 too many homes per year in the last 5 years but HPI is just stopping.

For BTLers, their expectations rest on how they perceive the rental market will work out. Strong immigration, economic prosperity mean rental prices can increase (as earnings would).
For BTLers to sell from now, they would need to think the economy would deteriorate sharply.
This is not the case YET.

And by the way, we are heading towards higher IR.
I would believe IR near 7% by the end of 2008 would be possible.
This implies interest charges to go up sharply.
If HPC occurs, it does not necessarily mean that affordability will improve. It could even deteriorate for the non-cash buyers.
There is no such thing as a free lunch

The current levels of demand are clearly fuelled by speculators/investors and a certain panic amongst general buyers of having to get on the bandwagon before it rolls off and leaves them. Ultimately, that's all fuelled by cheap and easy credit.

Take that away and the market will correct itself. The only questions are 'when?' and 'by how much?'.

There are definitely signs that the correction has started, it'll be interesting to see what sort of momentum it will gather.

Buy to let has caused a large part of the house price boom IMO. Far too many people jumping on the bandwagon fueled by TV shows that make it look easy.
There is still a huge demand for property but they demand cheap property. There is a desperate shortage for affordable property so people are forced to either rent or stretch themselves to houses they can't afford. This keeps the demand for rented property up (although rents seem to be coming down) and house prices high.
Part of the problem is that there are few green field areas for developers to build on so they're now turning to brown field which is expensive to clean up or expensive small plots of land.
Because land is now so expensive developers are building apartments rather than houses which again forces prices to stay high (if not go up).
So, for the time being, i can't see a house price crash coming soon. A levelling off, maybe, but not a crash.