Largely overlooked in the renewed spruiking of the rise and rise of housing prices is the salutary lesson learned the hard way over the past decade in that region. There the bubble didn't burst spectacularly, a la Keen, but property buyers have been damaged, especially property investors. Made possible by (relatively) low interest rates, sooled on by often-dodgy investment spruikers and fuelled by intemperate lending, the working-to-middle class south-west seized on the early noughties property boom with a vengeance – a "safe as houses" way of getting rich for those indoctrinated by the negative gearing salesmen. The early period of the bubble – before it's obvious there is one – can be rewarding but for those who bought near the top in the first half of 2004, the reality has been six miserable years and a level of forced sales that at times distorted broader Sydney statistics. As the accompanying graph from RP Data shows, average south west Sydney house prices went down and stayed down from that 2004 peak, barely regaining those levels now. And RPdata research analyst Cameron Kusher says the outer south western Sydney region continues to see a lower level of price growth than the Sydney average. Add interest charges, the hefty holding costs inherent in real estate and the even worse opportunity cost of the funds tied up in a dud investment, and that $350,000 median house remains an economic disaster.

Even someone buying in mid-2003, a year before the peak when the median price hit $300,000, is still behind. The boom "winners window" wasn't open for long. It's not just the stock market that can go flat. Yet it is something of a testimony to Australians' dogged belief in home ownership that it wasn't worse. Among the side issues Keen and his few allies have failed to adequately assess is willingness of Australian property owners to either soldier on servicing their mortgage or take their lumps by selling up before the bank forces them to. More fundamentally, the core issue for Australian home owners isn't the relative "expensiveness" of a house or the size of the debt, but the ability of the owner to service that debt. Rory Robertson put it more bluntly when stung by a reported suggestion that there might be a second leg to his bet against Keen's dire forecast of an imminent 40 per cent crash in average Australian housing prices, never mind a depression with 15 to 20 per cent unemployment. Dr Keen is preparing to walk from Canberra to Mt Kosciuszko, but still claims that he will be right – one of these years. "The fact that the downtrend in house prices underway in 2008 ended within a few short months of the bet being agreed, rather than 10-15 years down the track, and with prices then rising to new highs within a year simply highlights how hopelessly wrong Dr Keen was about the outlook for house prices," writes Robertson.

Looking back, the drop in local house prices from their first quarter 2008 peak was small and short-lived, rather than large and prolonged as anticipated by Dr Keen, mainly because the RBA's big (and predictable) interest-rate cuts alongside Canberra's deposit and funding guarantees quickly stabilised confidence and ensured extraordinarily cheap funding for most existing and would-be homebuyers. Counter-cyclical macroeconomic policy worked. "For the record, the peak-to-trough fall in the ABS house price index was only 5.5%, so Dr Keen was out by a factor of seven! "House prices on average now are 10% or so higher than in late 2008 when Dr Keen famously sold his home. "Betting the house on an economist's forecast typically is not a smart move. Unfortunately, Dr Keen recklessly encouraged everyday Australians to sell their homes at what turned out to be the peak of the global financial crisis and the trough in local house prices." Robertson says he has no strong view on the outlook for house prices, seeing both positives and negatives, but believes that extremists will continue to be wrong.

"Those with the strongest views that the price of Australian houses "must" fall typically either don't own one, don't really know what they are talking about, or both." Yet the south-west Sydney story over the past decade shows a crash doesn't have to be spectacular to hurt. What might unnerve some is the speed of the price recovery in parts of the Australian housing market was approaching the stuff of bubbles if maintained. The RBA is pleased to see a slight cooling in home loans and a quiet tightening of loan to valuation ratios by Australia's banks, a sign perhaps of the banks themselves either taking a hint from the authorities or seeing a potential danger themselves. Loading As Robertson alludes, extremists of both varieties will be wrong. The RBA thwarted the Doomsday scenario – and it will also do what it must to prevent another asset bubble. We have indeed been warned.

Michael Pascoe is a BusinessDay contributing editor – and he owns a house.