bubble in ireland was, i think, from 40-60% off the peak prices.

Did many people invest in houses ?

Hardly a bubble here in Oz. House prices down by about 5% and now stable again.

Oz is, I think, the third biggest bubble. Possibly the fourth, if one counts South Africa. Y'all are right in between the UK and Spain, and not that far behind Ireland. When compared to income growth instead of merely looking at price appreciation, Oz blows Ireland and the UK out of the water. Then Spain is the only country in your league, and they are much poorer and integration into the EU generated massive income growth that people not unreasonably projected into the future as they expected to converge to French income level. They also had the second home inflows from the UK and Germany driving up prices. Oz has neither of these things. House prices have barely fallen in Spain either with 22% unemployment and 45% youth unemployment for going on three years. There is something to be said for US bankruptcy laws, even as the foreclosure system is stretching at the seams.

Amby, y'all most certainly do have a housing bubble. In fact, y'all may have the biggest of them all. Price are really only down at all in the US and Ireland.

Yes but unlike every other western country on the verge of slipping back into recession and with growing unemployment, Oz continues to grow, has only 5% unemployment (& falling) and some of the highest interest rates (with is probably the only reason real estate prices aren't going up.) Doom and gloom academics like Steve Keen bang the same drum on income levels but he's been proven wrong over and over again.

And there was one academic in Ireland screaming bubble and he was dismissed with, but we're growing like gang busters and we have low unemployment. Then he turned out to be right. House prices in Oz are VERY high relative to incomes. House prices have risen much faster than incomes for a quite long period of time. Eventually, house prices must rise slower than incomes. Markets for houses inevitably involve leverage, so some people will be caught speculating when trends reverse and will face deleveraging. That will result in liquidation of some of the housing stock and price drops. Those price drops will cause some recent buyer to have negative equity in their homes and negative wealth effects will kick in reducing debt driven consumption growth. Then people will start thinking maybe house prices don't always go up and perhaps they even go down. Then a buyers' strike sets in as potential house buyers think that waiting might yield lower prices and then your will see consistently falling prices. Then banks will panic given their portfolios of housing related loans and they will all try to cut back real estate lending at the same time.

At the very least, Oz must have an extended period in which incomes grow faster than house prices. Ask yourself what would happen if everyone in Oz suddenly expected houses to get cheaper in real income adjusted term over the next 10 years. The best rule to remember about bubbles is that they go on much longer than you expect and they pop more quickly than you expect. I remember being in Florida for Christmas in the early 2000s and thinking things were totally insane. My portion of the family were having private conversations about the aunt who had just bought on the grounds that prices were going up to price her out forever and what the odds were of her being crushed by her mortgage and stuck with a "worth less" house. The bubble then expanded much further over the next 3 years from the levels that seemed crazy to people from Texas. And yes the dismissing of bubble talk was there in California, Florida, Las Vegas and Ireland and Spain and the UK. Households have a paycheck and a portion of that pay check can be used to pay for housing. If the price of housing goes up faster than the total amount of the pay check, then either price increases must come down relative to pay check increases or households must eventually spend more than their entire pay checks to procure housing. In the US (especially in California), people talked about how it was rational and sustainable for normal 3 bedroom houses to cost over a million dollar and for people to get 50 year adjustable rate mortgages. At the peak, comparable houses in Orange County (outside of LA) cost 5 times what they did in suburban Dallas or Houston, where median household incomes were actually slightly higher.