Next year is shaping as the year that the bulls and bears of the world’s last unpopped asset market bubble — Australia’s property market — will collide head on. The gap between those predicting yet another bubble and those predicting its ultimate popping has closed.

The bulls as always, emphasise the “fundamentals” — population-fuelled demand outstripping laggardly supply — and that “Australia is different”.

The bears, as always, emphasise leverage — that the true fundamental behind asset prices is people’s willingness of people to go into debt to buy them, in the belief that they can flog them for a leveraged profit to the next Greater Fool. And on the “We’re different because we have kangaroos” theory, the bears contend that Aussies are just as susceptible to a well-disguised Ponzi scheme as anybody else on the planet.

I doubt that most people realise just how different Australia has to be to the rest of the world to sustain the bulls’ expectations of yet another explosion in house prices in 2010. Not only do we need to defy a worldwide trend of falling house prices, we need to sustain that on top of a house-price bubble that has already exceeded the best the rest of the debt-driven world has achieved in the past 20 years.

Australian house prices rose by a factor of five since the 1987 stockmarket crash, far more than even US house prices. Even adjusted for inflation, Australian house prices increased by more than  250% from 1987 levels, while the best the US’ housing bubble could manage was a 180% rise before it burst in 2006.

One irony in the bull case is that it relies on the market not working properly — though the bulls push the supply-and-demand line, they also rely on supply failing to do what it allegedly does in normal markets, and responding to increased demand in a manner that tempers the demand-driven price spike.

They also are happy to receive state handouts when it keeps the bubble afloat. This year was clearly the year of the government-sponsored house price bubble, with the first-home vendors grant driving up sub-$500,000 prices by as much as $40,000. Those happy vendors then leveraged their bonus $40,000 from panicked first-home buyers into an additional $200,000 or so on their next purchase, which inflated houses up to the $1 million mark.

On January 1 2010, that government boost completely disappears, while the “right wing” of our schizophrenic government economic management system, the RBA, has declared that it might attempt to prick the bubble caused by the left wing’s fiscal boost to house prices last year.

So with one artificial prop to the market removed, and another wing of government threatening to prick what the first-home vendors boost re-inflated, we’re down to the final battleground: will Australians willingly increase their exposure to debt to finance yet another acceleration of house prices, and will banks and lenders accommodate them?

Lenders don’t have much room to add to leverage in the Land of Oz. We’ve long left the Kansas of the 1960s, when banks required a 30% deposit — so that someone with a $50,000 deposit could bid no more than $167,000 for their dream home. But having skipped down the Yellow Brick Road of rising leverage, the global financial crisis has stopped the Wizards in their tracks. Without it, we may well have cracked through the 5% deposit — which turns a $50,000 deposit into a $1 million purchase price.

Now their are rumblings that, gasp, a 10% deposit might be required in future — and suddenly that $50,000 deposit will only finance a $500,000 dream home.

That could be a nightmare for vendors this year — and, of course, for the Wizards of Debt as well. I’ll almost certainly find myself (and some friends) trekking from Parliament House to Mount Kosciuszko in late February 2010, since the final gasp of the FHB is almost certain to drive the ABS’s established house price index above its pre-boost peak of 131. But I expect that as I come down from the mountain, Australian house prices will also be losing altitude.