Why can't they fall 40%? They said the same thing about the US, Japan, Europe, etc
House prices are overvalued, but they can stay that way for a long time. Look at any measure, prices to disposbale income, mortgage debt to GDP, interest to disposable income (especially when you think that rates are very low), etc. Why do you think retail sales are suffering? It's not because people are shopping overseas, but consumers are beginning to realise that they have too much debt and would be ruined if they lost their job in this environment.
The biggest driver of house price declines would sharp rises in unemployment - driven from a major slowdown in China perhaps? I wouldn't be surprised if we had a Japan like situation where real prices were negative and with low to zero nominal growth.