But it reminded me how distorted my views on house prices had become after excess exposure to the panic conditions dominating the Sydney property market. In any rationally functioning market or mind, paying over $1.7 million for a two-bedroom apartment should be thought painfully extreme rather than an example of restraint.

Tim Lawless, CoreLogic's head of research in Asia Pacific, says the acceleration in housing conditions in Sydney and Melbourne over the last several months is evidenced by continuing low stock levels, high auction clearance rates and strong investor demand.

He predicts the recent massive capital gains increases are unlikely be sustained at the same rate given mortgage rates are edging up and there will be a further burst of restrictions by the regulators trying to limit bank lending to investors.

But few "experts" are willing to predict a fall in Sydney apartment prices or, except for a few pockets, in Melbourne. And the new normal must also take into account the continuing inflow of Chinese investor money despite the efforts of governments in both countries to restrict this.

By chance, an article in The Australian Financial Review this week by China correspondent Angus Grigg compared what that same amount of around $1.7 million would buy in Shanghai.

Good value from a Chinese perspective

This translated into a smaller, far less attractive place in a suburb of anonymous high rise apartment buildings 30 minutes drive from the CBD. According to Credit Suisse research, the price of median apartments in Beijing, Shanghai and Shenzhen were all at least 15 per cent higher than the equivalents in Sydney and 50 per cent higher than Melbourne.

That is only one of the many reasons why the Chinese interest in Australian real estate, especially in Sydney, does not look likely to fade away. On sheer numbers, that can be overwhelming. A New York based global fund manager tells the Financial Review that what might seem a trickle of money into Australia from the Chinese perspective turns into a torrent from the Australian perspective.


But that only compounds the problem for a federal government as various ministers suggest the Coalition is considering ways to deal with housing affordability as part of the budget.

"It's dangerous to raise expectations on issues over which you have little control," says one Liberal minister. "You get to own the problem."

That's also particularly dangerous when the government keeps saying it's all about the supply, which is mainly a state government responsibility anyway. It is true that states have repeatedly proven inept at matching demand with supply or any reliable transport options to make outer suburbs more appealing to younger generations.

Falling new home sales

Figures from the Housing Industry Association Thursday showed another big drop in new home sales in NSW last year – despite Sydney's population reaching more than five million, only being outpaced by Melbourne (4.6 million) in terms of the rate of growth.

But that only makes it more imperative for this budget to be seen to take decisive action to address "affordability" given the appeal of Labor's argument that curbing negative gearing would help.

Some ministers are still playing with the government allowing people to access their super. Neither Scott Morrison nor Malcolm Turnbull have followed the very obvious public hint from Mathias Cormann suggesting this would be a truly dopey idea that would only push prices up.

At the same time, the Coalition is ruling out any move on negative gearing having so derided Labor's "tax more" mentality. That leaves Morrison publicly encouraging the regulators to announce more restrictions on the Australian banks over their investor lending – with all the signs suggesting this will happen relatively soon.


But it is still unlikely to be enough, especially as non-bank lenders try to fill the gap.

So the most feasible option left seems to be a more concerted effort to moderate the level of Chinese money that is inevitably adding to pricing pressure.

This approach is likely to include further restrictions and higher taxes on the ability of foreigners and those living here on visas to invest in real estate, even off-the-plan apartments. Another option would be to ensure a certain percentage of any new developments is set aside for Australian buyers.

"Foreigners don't vote!" says one MP helpfully.

Whether that would actually divert the "torrent" or be more like sticking a political finger in the dyke is less clear. So I am glad I have plunged right back into Sydney property. I just wish my kids could afford to.