Yes. In a sell to the highest bidder, you aren't going to win with the amount you can borrow over 30 years, if the people bidding against you borrow on 50 or 100 years. Simple as that. So without any caps, people will request long mortgages simply to be able to win these auctions. Should be noted that this is now developing backwars again, and "peak insanity" was early 2000's. What we are seeing now is to a large extent the effect of common sense on the prices. The attempts to stop the insanity over the last 5-10 years (e.g. down payments went from 5, to 10, to 15 to 20 % etc) unfortunately coincided with negative interest rates, meaning people could still push prices up. Now we are finally seeing the effect.
> or because people prefer "owning" (renting from a bank) instead of renting from a landlord?
Yes, there is effectively zero renting of 1-family homes. If you rent, it's a flat. And there are very few flats to rent. A LOT of the people having to buy these expensive homes would rather rent, but there is nothing to rent.