Absolutely. Nobody would be paying the current prices if they didn't expect the value to increase. Prices are a reflection of the financial value and not the ut

Absolutely. Nobody would be paying the current prices if they didn't expect the value to increase. Prices are a reflection of the financial value and not the utility. This is the reason that interest rates are fundamental. If we really have turned the corner on the steady decline of interest rates that we've seen over the last 20-30 years then property markets are not going to 'plateau'. They will fall to a point where new buyers can afford to service the loans. Of course, as noted above (prices being as high as they are due to expected future increases), if prices are falling then not only do new buyers wait for prices fall to a point where they can service the loans again, but they will also focus more on utility value as public sentiment moves away from 'property prices always go up'. This will compound the falls. That said, there will undoubtedly be a lot of policy engineering employed to avoid losses and kick the can further down the road. In the long run I don't think it will be successful. The only thing that will save the property market is a return to low rates. Every time the issue of housing affordability comes up on this site, the debate quickly moves to zoning and nimbys and such. In my view this is important to an extent (more so in some areas than others), and building more homes is always helpful, but it is not as significant as interest rates and the 'artificial' demand that is induced by speculation.