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The sub-prime market in the USA is much larger in percentage terms than the equivalent here which is the non-conforming loans market. Even with the rises in interest rates very few Australian borrowers are defaulting on their loans. In this booming economy unemployment forcing people to sell is not an issue, the people who are caught are those who are way overcommitted on loans and can't afford to pay them even with jobs.
No doubt some people paid too much for their houses recently, particularly in outer areas that have lower capital growth potential, but the picture you paint is not realistic.
We bought our first house in 2000 after about a year of the boom, I had friends who refused to buy because they thought it was a bubble then and were waiting for the correction. They waited and waited, and ended up buying in 2004 after prices had climbed even further.
I wouldn't say rush out and buy a house right now, but I don't see any reason why the market will collapse, subprime borrowing is not an issue in Australia, interest rates are still moderate, the economy is booming forcing average wages up and immigration is at the highest its ever been. Plus new building starts are at an all time low.
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