These days I could not ever see me spending more than £500 on any bike that's new, used or assembled from bits. I just don't have the disposable income, that's mostly due to having kids and a mortgage to consider before my own leisure costs.
Before the kids I had a couple of pricey bikes which were nice enough but I would say the (relative) scrap heaps I ride now are more fun, suit my riding better and damaging thwm worries me far less as I don't have anything like as much money tied up in them.
While I can understand the whole conspicuous consumption thing that goes with owning an expensive bike I would have to say the Diminishing returns point probably still applies above £600ish Whatever you are buying and a perfectly good bike can still be had for ~£300 IMO.
Inflated expectations are the real issue.