if prices don't come off 40%, it'll be a first, page-34

"Sure it won't be the end of the world - but to get in that position the Australian economy would be very sick."

Maybe, maybe not. We've had the GFC and got through that unemployment wise pretty well, mainly due to China. The weaker businesses have been culled already. I think inflation will slowly creep up and the RBA (or banks independently) will adjust accordingly. However, I think Australia will handle this pretty well, again on the back of China. I think property will slowly bleed but would not be surprised at an acceleration towards the end (1).

"Far more home owners would likely be burnt than investors."

I think home owners are less likely to look at their place in pure dollar terms. Once they have bought I think they are less likely to sell based on market conditions. Investors however are in it purely for the money and any dowturn, whether long and slow or short and sharp, will unsettle some of them who will sell and this would probably exasperate the situation.

(1) This is all crystal balling of course!