"OK so the reason it will stabilise is because there is this supposed ceiling on affordability."
You have to admit that there is a concrete limit on affordability? How can you have house prices increasing at 15% and wages at 5% indefinitely? Noone knows the exact level, but I think we're pretty close.
"The fact that this existing level is being (at least maintained) suggests that, at worst, for existing property investors the price will stagnate. How am I doing so far?"
That the existing level is being maintained suggests that it is _possible_ that the existing level is sustainable. I don't think it is a definitive argument against a possible fall in price.
There are a couple of reasons that I think prices could drop:
- Prices are at record highs (and affordibility at record lows)
- Slower economy and increased credit costs due to credit crisis
- More stringent lending standards from banks
- Low rental yield (even with record high rent)
- Current pessimism in the media regarding house prices (report from IMF that 25% overvalued etc)
- The "house prices never drop" myth has been busted by US/UK/NZ/Ireland etc all seeing large drops.
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- no boggle eyed spittle spraying please
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