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For the first time a house price and spending boom is international - affecting New Zealand, Australia, the United States, Britain, Spain and other European countries at the same time.
Household debt levels are much higher than in the past and house prices are high compared with incomes - arguably more overvalued in many countries than ever before.
The Economist magazine recently argued that US consumer spending was driven by high home prices rather than higher incomes, but some of that wealth was simply "phoney".
Higher house prices did not mean an increase in productive resources - allowing Americans to earn and spend more.
And homes are a big part of living costs.
The "wealthier" home owners would be offset by "poorer" home buyers or renters struggling to save more to buy a home.
"Society is no better off," The Economist says.
Americans have increased borrowing on the strength of higher house prices, but that "equity withdrawal" is slowing and consumer spending is declining and may even "collapse" if house prices fall, it warns.
Westpac Bank chief economist Brendan O'Donovan argues that New Zealand house prices had risen about 50 per cent in three years but most of that was justified by "strong fundamentals".
The economy got a big boost from a low dollar a few years ago, interest rates had been low, migration has been strong, and wage and job growth has been high.
"It is the last 10 per cent (price rise) that is the fluff - that may correct over time," he says.
The International Monetary Fund (IMF) has questioned whether the global increase in house prices could be due for a price correction .
According to the IMF, the recent housing boom is not always explained by market fundamentals. In an essay titled The global house price boom , the IMF attempts to explain the recent rapid rise in global house prices, particularly in industrialised countries.
The essay reports that housing indicators - including the affordability ratio (a measure of house prices relative to income), the ratio of house prices to rent, and mortgage debt as a percentage of GDP - have all reached record highs in several industrialised countries.
According to the IMF, prices in industrialised countries have increased unusually rapidly in recent years, with their momentum seemingly little affected by the bursting of the stock market bubble or the subsequent global downturn. This is a familiar scenario for South Africans who are wondering when the upturn will end.
The authors ran econometric tests to determine the extent to which rapid house price increases are a result of strong fundamentals such as income growth and low interest rates. The tests found that, on average, house prices were indeed a product of these fundamentals. There were a few exceptions, however. House prices in Australia, Ireland, Spain and the UK, exceed their predicted values by 10 to 20 per cent suggesting the possibility of a housing bubble.
Although the IMF report dealt mainly with industrialised economies, property economist, Erwin Rode said that the South African housing market follows exactly the same fundamentals as those mentioned in the report. He felt, however, that additional variables need to be added to the house price equation. Rode said that replacement costs are an important fundamental, as well as the effect of a large emerging middle class in South Africa.
According to Rode, the upper-priced houses are showing signs of being dangerously expensive . Selling prices exceed replacement costs by a substantial margin. However, Rode does not foresee a collapse in house prices but rather a decrease in the rate at which they increase. This is barring an external shock; the most likely being a spike in interest rates, he says.
Rode said that econometric tests run by his business indicated that the South African housing market should be rising at 12 per cent per annum, a far cry from the latest growth figure of 27,7 per cent reported by Absa.
House prices are deemed by many to be the quintessential non-tradable asset , making them relatively immune to movements in international markets. However, the IMF says that house price cycles across countries may be synchronised if the forces driving house prices (such as output and interest rates) tend to move together across countries.
Rode said that South Africa appears to be lagging countries like Australia by about 2 years. This implies that there is still some growth left, but that prices are due to come under pressure, as is currently the case in Australia.
South Africa also differs from many industrialised countries in that we are currently experiencing a stock market boom as well as a housing boom. Although the IMF found that there is no contemporaneous correlation between housing and stock prices, Rode said that people will be prepared to pay more for a house if they have earned good returns from the JSE.
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