Property experts are predicting a further 0.7 per cent decline in house prices across the country amid a glut of properties for sale.

NAB's June quarter Residential Property Index declined from +5 to -11, with Australia's two most populous states recording the biggest decline in conditions.

The report shows the national average house price declined 2 per cent over the quarter.

Victorian home prices declined 2.9 per cent and New South Wales was down 2.3 per cent, while Western Australian prices held up better falling just 0.6 per cent.

Queensland and South Australia/Northern Territory had price falls of 1.7 and 1.6 per cent respectively.

The decline in house prices was matched by a slowdown in the growth of rents, which rose an average 0.4 per cent in the second quarter, down from 1.1 per cent in the first three months of the year.

The outlook for prices over the next year is expected to reflect the trends in the June quarter, with an average national decline of 0.7 per cent.

Victoria (-2.1 per cent) and New South Wales (-1.5 per cent) are expected to post the biggest declines, while Queensland (0.5 per cent) and Western Australia (1.6 per cent) are forecast to see house price appreciation.

NAB's report is based on a survey of 300 property professionals, including developers and real estate agents.

Property glut

One of the main reasons for the fall in property prices is a simple story of supply and demand.

While discussion centres on a lack of supply of new homes, there is certainly no shortage of homes for sale, many of which have been on the market for a long time.

Figures from RP Data show there were just over 300,000 homes listed for sale in Australia as of July 8.

That figure has fallen 7.4 per cent from a peak reached in November, but the reason for the decline in homes for sale is that there are less new listings, rather than more properties selling.

New listings over the past month were down 4.6 per cent on the same time last year, and 38.4 per cent below their peak levels, which is an indication that many potential sellers are waiting for an improvement in the market before trying to sell.

RP Data senior researcher Cameron Kusher says a 13 per cent fall in sales volumes since last year is the main reason so many properties are remaining on the market so long.

“Lack of absorption appears to be the issue here,” he observed.

“While listings remain at elevated levels it is likely to continue to restrict any significant recovery in the housing market; buyers simply have too many homes to choose from at a time when there is no urgency."

Mr Kusher says a lot of unsold stock has remained on the market for a long time because sellers were unwilling to lower their asking price.

As long as unemployment and interest rates remain low, there are not large numbers of vendors being pushed into quick forced sales, which was a major factor that drove US house prices sharply lower in a short space of time.

However, Mr Kusher says the end of winter may bring darker days for real estate.

"The spring selling season will be a big test for the market; this is a time when new listings generally rise,” he added.

And that could send the stock of properties for sale back up towards last November's peak.