Oddly enough, the tighter credit conditions now working their way through the residential market might be the main cause of price rises over the next two years.
Although tighter credit means fewer borrowers with funds to buy property, it also means fewer housing starts over 2008-09, according to researcher and Matusik Property Insights director Michael Matusik.
In his latest take on the market, Matusik says while the next couple of months might be "choppy" as some investors sell and more expensive credit plays out through the system, the key underlying fundamentals will come to the fore as the year progresses.
These are the strong economy, employment and population growth, along with demand exceeding supply.
The question of supply is an important one, particularly for price growth.
Matusik says new housing starts are expected to be around 145,000 next year, and that represents a stock deficiency of close to 40 per cent.
While price growth is tipped to be broadly between 5 and 8 per cent this year, 72 per cent of those replying to Matusik's recent website poll anticipate the undersupply will push prices back into double-digit growth during next year and 2010.
In the meantime, investors are quite cautious, with one in five surveyed doing nothing until the dust settles and the current economic direction becomes clear.
Twenty-seven per cent intend to hold on to their residential properties in anticipation that rising rents will help offset higher interest rates.
Close to a third say they will buy another residential investment property - something Matusik finds surprising given the high cost of entry and relatively low returns.
At the moment, one of the results of the cooler market is that private sales are making a comeback over auctions.
Auctions generally suit a market with lots of buyers and competition, but as market activity slows, so does the success of auction sales.
That seems to be happening in Melbourne, where auctions are traditionally a popular way of selling.
In Melbourne last weekend, according to the Real Estate Institute of Victoria, of the 660 properties auctioned, 413 sold at, before or after auction. But there were 521 private sales. Valuer Herron Todd White, looking at four areas of the Melbourne market in its latest monthly overview, has sales data for the Docklands. This shows of the 51 sales in January and February, three were at auction and 48 were private.
It also looked at the premier bayside suburb of Brighton, where auctions are still the predominant mode of sale. In the January-February period, a total of 94 were sold - 62 by auction and 32 by private sale. In the middle-ring established suburb of Preston, auction is again still more common but private sales are almost on a par. In Craigieburn, an outer-ring suburb, there were 84 sales in the same period, with 18 at auction and 66 by private sale.
HTW concludes that while the boom of the past 18 months is over, the current state of the market is now more normal, Melbourne auction clearance rates are in line with the long-term average and there's more balance between the buyer and seller.
The wildcard is still interest rates.
