Where I lived in Italy, people certainly purchase houses, but they don't expect them to have crazy returns like in the US. It's just a way to not pay rent and have something that you can hang on to even if there's inflation or other funny business (something that Italy has seen a lot of).
People even invest in, say, apartments, but it's a similar story: they expect them to hold their value and pay themselves off over a number of years. There are certainly returns on it, but they are seen as steady, long term investments.
Where I live in Oregon, during the most recent boom, there were houses "earning" more than 100,000 a year, just sitting there. That's more than the median household.
Yeah, it's a bit apples to oranges, but still, it's really out of kilter.
Long term, it'd be healthiest if housing were 'boring', neither gaining or losing much. That'd also facilitate people swapping out different housing at different stages of their lives without worrying about timing the market.
For instance, there are a lot of people getting older in the town I live in. Are they always going to want to or be able to shovel snow? Mow their lawns? Maybe a townhouse or a condo would be a better alternative that lets them stay in their general neighborhood.