Everyone thinks it's the flood of money coming into the system driving up house prices, it's not. It is purely the fact our banks are giving us 1.99% interest rates now. If your bank was giving you 6% interest rates (which they were in 2012) probably only has you a purchase price capacity relative to an 800k place at 1.99% of about 500k purchase power. So no your house isn't really worth more, it's all fugazi based on interest rates. The massive gap left open is 300k in this case below.
500k loan @6% = $2997 per month repayment 800k loan @1.99% = $2956 per month repayment
The bank ONLY gives you the loan based on your ability to service it. If you can only service $2990/ish per month, then you know the drill.
If interest rates ever go back to 6% which is very plausible scenario in a few years, then if you've been sucked into an 800k loan you will paying $4796 in your new repayment, a FAR cry from what you thought you were getting into. 30 years is a LONG time. Stay safe
