Property Collapse?

Fairfax financial journalist Bernard Hickey figures property prices in New Zealand are over-valued by 30%, and a dramatic slump is inevitable.

By my reckoning, house prices are about 30 per cent over-valued at current interest rates and current wage growth rates.

He argues that the market will correct itself quickly (and painfully).

I agree that the market is over-valued, but will it drop that dramatically? Most commentators agree that the current boom has reached the top of the cycle, but I don't see compelling reasons for a huge and rapid drop. The market has started to even out, and prices in some areas may drop 5% this year, but overall I don't see any reason to panic.