The effect on housing you see is a unique artifact of unconstrained unregulated capitalism: Property investment firms and private, "house flippers" have been buying up old houses at market value in many US cities for over a decade. They paint them grey, put new cabinets in, a new shiny refrigerator, and put it back on the market for double the price.

The first time one of these places sells (with black mold still in the basement, asbestos in the walls, and lead paint the children's room) the value of the nearby houses goes up and everyone starts looking to sell THEIR old beat up black mold and asbestos special. It starts a boom and suddenly a whole neighborhood of 300k$ houses become 1million$ grey monstrosities.

This all drives up the cost of new construction as well (which is always a little more pricey than buying an older home) and so you get overpriced mansions that you describe as well, but the root cause is the removal of the entire "bottom" of the market. It is now almost impossible to find what Americans call a "fixer-upper" in some cities.