You are right about the root cause, but may I say wrong when stating: It was then no longer about supply & demand,
Actually it is still about supply and demand. What happens is that in a housing boom the demand curve is shifting to the right. People want to buy more houses at any given price. The demand curve has shifted to the right because:1) People think buying a house has become attractive; 2) It is much easier to buy because lenders are offering various attractive mortgages (therefore effective demand is shifting to the right); 3) Higher confidence.
So, how to kill an incipient bubble? Restrict credit, raise taxes on property investors, etc, so that the curve moves back to the left. As already stated here Singapore did it and the same is doing New Zealand.
"New Zealand’s central bank will reinstate mortgage lending restrictions next month, with further restrictions to come for property investors, in a bid to curb the nation's surging house prices.
The Reserve Bank of New Zealand will tighten loan-to-value restrictions on mortgage lending, with the tightest restrictions to be imposed on property investors, who won't be able to borrow more than 60 per cent of a property's value as of 1 May.
All this, of course, in the short term. In the long term the focus moves to the supply side and, of course, at the elimination of rigidity factors, or red tape according to the more freedom for the free market advocates.
