More words on the strange nature of real estate in this land down under. Adam Schwab in Crikey: Big lie theory explains how the bubble inflates.

Why are seemingly rational people paying so much more for property than they did even as recently at 10 years ago? The main reason is most likely fear — this fear has been propagated by proponents of the “property lie” — the myth that property “never falls in value” and will be “more expensive next year”. Myriad property experts (usually, in some way related to the real estate industry) repeat the line and lazy journalists report their self-interested viewed unquestioningly.

Then there is another, less talked of factor that has caused otherwise rational people to pay far more for housing than they ever did before — that is, status. As Australia’s apparent wealth becomes greater, people inevitably become more materialistic. More so than ever, owning one’s home (rather than renting) is considered the major indicator that one has “made it”. Not only is owning a house a major status symbol — but the size and quality is also paramount.

So there appears to be a combination of factors underlying the bubble — easy finance, government policy, the desire for status and perhaps most importantly, a perceived shortage of property, which causes an inevitable bidding upwards of median prices as punters worry about missing out on their dream home.