A fortnight ago, my family and I moved house. It is always traumatic; and it’s amazing how much two young girls can add to the load.

As well as furniture, we had about 60 boxes to shift. Packing and unpacking took three days.

We’re renting: AUD$3,500 (US $2,500) a month for a three-bedroom house in south Sydney.

We did think about buying but attending a few auctions changed that. A similar house to ours, in the same area sold in front of us for AUD$1.7m (US $1.25m). Add tax and fees to the purchase price, and paying the interest on a mortgage – even at a record low rate of 4.18% being offered by one bank – would cost more than AUD$6,000 (US $4,300) a month. So, paying the interest on a mortgage on a house like ours costs nearly double paying the rent on one.

After Monday’s dramatic fall, most eyes were on what Australia’s ASX stock market would do when it reopened on Tuesday.

Stock markets are often a proxy for a country’s economic well-being. On Monday Australia’s suffered a hit. Would it recover?

But another proxy is house prices. Over the last few years, they have soared.

Is Australia's mining boom losing steam?

But are such high house prices justified in Australia? And what would the implications be if they are not?

First, the implications of house price falls.

At AUD $6 trillion, the value of Australia’s housing stock is huge. It is about three times national GDP, three times, too, the total value of shares in companies listed on the ASX.

With house prices at all-time highs – averaging AUD $1m in Sydney – it’s a tough market for newcomers like me to get into.

But for those who bought some time ago, price rises mean big gains, on paper, in wealth. Some remortgage their homes, effectively raising money to spend in the rest of the economy.

But even for those who don’t, the paper gains in their homes' value translates into confidence to spend freely elsewhere. If that confidence disappeared because house prices were to fall, the impact on the rest of the economy could be big.

As the respected economist Stephen Koukoulas told Al Jazeera this week: “One of the real risks for the Australian economy in the next year or two is if house prices start to fall or weaken. We saw - during the crises when property prices fell in the US, the UK, Spain and Ireland and other economies - how damaging that was to the banking sectors and how damaging that was to the whole economy. If the tightening of rules on lending - and just the sheer affordability problems that many people are facing (caused house price falls) then the risk of recession would grow.”

In some places, prices are already falling. I was in Singleton last week – a town hit hard by the downturn in mining. There, house prices have dropped by close to half from peak. The main street is full of empty shops and glum faces.

But are prices likely to fall elsewhere too – in Sydney or Melbourne perhaps?

A little-noticed report from the property website Domain was published late on Monday with the latest data on auctions in Sydney. Auctions are how most Sydney residential properties are sold.

Successful sales at auction – sellers reaching their minimum, reserve, price – were down last weekend as “the market continues to be flooded by unprecedented numbers of homes for sale” it said. “Sellers are rushing to take advantage of a market that is still in their favour – for now.”



Could Sydney’s frothy market be on the turn?

A top official at Australia’s central bank, the Reserve Bank, said in June that the Sydney market was "unequivocally" in a bubble.

A few economists have predicted a "bloodbath" when that bubble bursts. But just as many economists have poured cold water on such reports saying the only way for house prices is "up and up".

A few facts though should sound alarm bells for those thinking of jumping in. Firstly, around half or possibly more of Sydney’s residential property is being sold not to people who want to live in it, but to property investors. Secondly, those property investors know they won’t be able to cover their borrowing costs with rental income – even at historically low interest rates.

Instead, they are counting on capital growth long term to offset the rental shortfall in the short term. The expectation of future rises justifies the purchase price. To me, that seems as close to a definition of a "housing bubble" as you’re likely to get.

One report last month claimed to show Australian housing was undervalued by 30 percent, but it included purchasers’ ‘expected capital gains in the calculation to work out fair current values.

That’s like asking someone buying a share not only what dividends they expect, but also what they expect the share itself to be worth in five years - and then including the guess of the future capital gain in share’s "real" - current – value. It’s circular. To me, it seems meaningless.

I would dearly love the housing market to cool – and for prices to fall. But be careful what you wish for.

Australia hasn’t had a recession in about 25 years – not since the recession Australia "had to have" in the early 1990s.

Most of the current talk is about the mining downturn or a potential stock market collapse. But if there is to be another recession, it is likely to be falling house prices that causes it.