Your home should not depreciate unless you made a very bad decision.
Exactly, that's why very basic hunter-gatherer homes from like 50,000 years ago such as caves, even using a conservative valuation of a few dollars, and conservative appreciation of 0.05%, are worth billions today. Why shouldn't oil appreciate even more than houses? Not only are they not making more of it (unless you have 300m years to wait...) but we're actually burning up what we do have!
He's a brain exercise. In a closed system, with a stable population, what should the price of RE do, and why? Or food or gas for that matter? The same people go to the same jobs, and generate the same value for society each day for a decade. As a group, the produce the same quantiy of goods and services, and it's balanced by what the group consumes, each getting a slice of the pie according to the relative worth of what they contribute. This would be a zero growth society, but everyone fills a role, and everyone has the housing, food, and transport they need. I would argue in such a system all prices would remain the stable, subject to the vagaries of material changes to items such as depreciation, in which case you would pay a fixed about to repair it, and maintain your home at the same value.
Throw in some instabilities, such as technological improvements, and you'd actually either expect prices to drop, or goods generated to increase (bigger homes). Throw in a hurricane that wipes out a third of the homes, or a 10% influx of immigrants, and you'd expect homes to go up, due to higher demand. But after that initial shock to the system, you once again would expect it to find a stability point.
Go back 200 years. While times were much harder, you'd generally have expected probably similar allocations of people incomes to the big 3 things (home, food, transport). Call it 30/20/10 for arguments sake. As technology and sociological improvements occur, both incomes, and quality of goods produced improve (economic growth, in short, 'more stuff'), however, on a percentage basis, why should there be a huge variance in the percentages allocated to each thing? This is why when you look at housing over very long terms, you generally see it match inflation + GDP growth.
If what you're positing continues unabated where home prices increase faster than wages and inflation forever, what's the ad infinitum result? Basically what you have in Toronto now. Requiring 200% of the average Canadian income to buy a property which most would consider the absolute bottom of ownership - (ie a 300 sq ft condo) that costs 400k.
Take a look at an average 3br home, a 45 minute commute from Toronto, and you have to be a 1%er if you want to buy and maintain a historically sensible price/income ratio. So the situation is that you have to either be a 1%er, or over extend yourself to the gills to buy an average house. Neither bodes well for a stable society.
But, the fact remains, many people have made a lot money in the last decade of Canadian RE, and I fear it blinds them to a fierce and honest evaluation of the facts because they're so busy patting themselves on the back for being so brilliant. I saw the same thing in 99 with tech stocks, with gold and particularly silver in the late 2000s, and the same thing 18 months ago with bitcoin. It literally *is* on it's way to the moon. Until it isn't.