Yes, the supply curve of course plays an equally important role. However, I have read some claims that the high house prices cause the high salaries, which is ludicrous to me. In order for prices to be high, the buyers must be able to afford it and willing to pay it (the demand curve).

There probably is some feedback curve. The higher housing prices do raise labor even of "commodity" low end jobs but there is an important third variable without salary and housing would both collapse - does the employer get anything out of the expensive location which justifies setting up there instead of some place cheaper?

That something can take many forms from access to customers, the "prestige" of an area being an effective requisite where those who don't pay the expense are judged as second tier regardless if it is true or not, or simply that the location is a literal prerequisite like minerals in the area for an extractive industry. Let any relevant to the instance specific quality or quantity over others be termed "edge" as it is about relative difference mostly.

For a concrete example it would be Lewis Carrollian madness to set up a gold mine the next town over without any precious metals because the no matter how much the land and wages are cheaper for the mine towns have the infinite edge for gold mining over one with literally none.

Establishing a mine in the third world with lesser deposits to get half of the gold per mine for a tenth of the wage and real estate costs would still win in spite of the weaker gold veins.

In thie case locally biggest threat to wages and housing price value other than literal anhilation would be the loss of an edge to justify it. The edge in this case is fuzzier, partially the prestige and partially the talent of "performers" measured in outcomes. Those are also in somewhat circular feedback loops. The prestige attracts the performers and the success of the performers maintains the prestiege. A slip in performance will cause eventual collapse of prestige if they fail to justify their expense. Damage to prestige may limit income of new talent or lead to an exodus.