Look, valuation leading to a judgement of the Wealth of Iceland utterly depends on the criteria one brings to the process.

And not just Iceland.

Which is why property is going 'poof' - there's a little bit of a problem with insurance on loans guaranteed on property which is crashing in value. The property doesn't need to go 'poof' - it just needs to make a massive loss. Which it's well on its way towards.

There will still be some residual value, but like every other market over-reaction, momentum becomes more important than reality. Some people will still want homes, but how much is an empty foreclosed house worth if no one can get a loan for it?

Value isn't created by reality but by confidence and mutual trust in ability to pay. When trust disappears, value goes with it, even when the real economy still has real things for sale.