Bears V Bulls, page-4

If house prices continue to decline then negative gearing becomes a moot point. No investor would buy an investment property to lose money on both income and capital. Likewise, CGT becomes a moot point if house prices keep falling.

Economic fundamentals invariably look best near major tops in markets (financial, commodities and real estate et al). That's why so many marginal borrowers get lured into the market near the peak and why banks are so willing to lend into peaks too. In short, markets top on good news, not bad. And they ultimately bottom on the worst news (which also explains why so many investors eventually capitulate near bottoms).

As for a trigger to rising unemployment and a slowing economy, declining house prices alone can directly and indirectly trigger both (eg. reduced consumer spending due to the negative wealth effect and a slow down in construction/building and the FIRE industries - a major employer of Australians). History has shown that you don't need a trigger to burst a housing bubble. A self-deflating housing bubble can and will eventually trigger financial, economic and social crises.