700k would get you a run down 2 bedroom terrace or nice 2 bedroom apartment + parking in Newtown. Granted the prices have come down a bit recently. It feels only like yesterday a deceased estate with holes in the floor went for 900k. I went to inspect that place and later laughed at how much it sold for.
I like the deliberate underscore you've placed there.
Selling then renting in this current environment would certainly be an attractive idea. I know a guy who says "I'm a millionaire!" when in conversation about his Coogee house. And sure, it's all paid off and it is worth a million or so, but to actually be a millionaire he has to sell that and trade down, and in Sydney trading down and keeping that cash means living out in Campbeltown somewhere. Not a lifestyle he'd be accepting I don't think. So yeah, he'd have to sell then rent, losing his security, but he would be a millionaire.
But like you said, there's too much up in the air and danger of the government stepping in and propping up house prices. They are very keen to do so to keep all those millions of baby boomers off the government pension. Economically Australia would be fucked if prices crashed.
Personally I'd love it to happen though. Eventually this has to turn in favour of the majority or we are just making a problem much worse generation after generation.