[hackits]

You're correct, but missing one major factor. The price of land. If you have a look the countries with housing market bubbles have high regulation with zoning and release of land to build houses on.

Take for example Australia. We have one of the most highly regulated land zoning regulations in the world. That and the high price of land where you can build a house on. If you track construction cost vs land prices you will find that land is one of the major contributing factor's to the price of houses.

For example, the house I recently purchase I purchased for $330,000 AUD, but the land is worth valuation is $315,000.