Whichever way you look at it — forward or backwards — Australia's housing boom is well and truly off the boil.

Key points: Falling house prices in the September quarter adds to evidence the property market has peaked

Falling house prices in the September quarter adds to evidence the property market has peaked Tighter lending rules, low wages, a drop in Chinese investment and falling auction clearance rates point to ongoing weakness

Tighter lending rules, low wages, a drop in Chinese investment and falling auction clearance rates point to ongoing weakness Population growth is likely to support prices to an extent but not absorb all new housing supply

The latest evidence comes from the rear vision mirror of the Australian Bureau of Statistics' house price index which fell in the September quarter.

The slowdown was most marked in the investor hotspot of Sydney, while price inflation also appears to have peaked in Melbourne.

Looking forward there are obvious speed humps in the shape of further regulatory tightening on investor loans and weak wages growth.

On top of that, new apartments are banking up like a multi-car prang at peak hour, while a pull back in Chinese investment and falling auction clearance rates are hardly supportive of prices re-accelerating either.

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Sydney house prices fell 1.4 per cent, while Melbourne eked out a modest gain — but well off the growth of recent years.

Hobart, which joined the housing express lane late, reported the strongest quarterly rise (+3.4 per cent), while Brisbane also accelerated modestly. Other markets were relatively flat over the quarter.

Nationally, the residential property price index was down 0.2 per cent.

"For anyone in doubt, the weakening in house prices in the third quarter all but confirms that Australia's housing boom is over," Capital Economics' Paul Dales said.

Mr Dales said more up-to-date indicators —such as monthly price series compiled by CoreLogic — suggested prices fell further in the fourth quarter and may decline next year.

That, as Mr Dales noted, represented a big change from a year ago when house prices were rising by around 3 per cent a quarter.

"The cut in the supply of credit to investors and the rises in investor loan rates caused by APRA's new rules in March that triggered this slowdown will probably continue to weigh on the market next year," Mr Dales said.

"They [the housing markets] are also more exposed to further falls in prices, as our house price to income ratios suggest prices there are well above their sustainable level."

Will population growth save house prices?

However, while the brakes are being applied, does it mean a crash is imminent?

HSBC's Paul Bloxham argued national housing price growth would merely throttle-back from the double-digit rates of recent years to somewhere between 3 and 6 per cent next year.

"We do not expect a sharp decline in housing prices and expect only a modest decline in construction activity, as both are likely to be supported by strong population growth and low interest rates," Mr Bloxham said.

"A hard landing is possible, but we believe this would require a negative shock from abroad and a sharp rise in unemployment rate."

The view at Capital Economics was that rapid population growth may provide some comfort for those worried about a market crash, although it was unlikely to prevent prices doing anything much but going sideways for the next couple of years.

Mr Dales noted population growth only boosts house prices if extra demand is not met by additional construction.

"However, in recent years the number of new homes built has far exceeded the number required by the growing population. This overbuilding is much greater for apartments than houses," he said.

Mr Dales forecasted home building would continue to outstrip underlying demand for the next four years.

But more importantly, Mr Dales argued the cost and availability of credit, as well as the overall health of the economy, were bigger influences on house prices than population growth.

"Overall, population growth is unlikely to be strong enough over the next few years to absorb all the additional supply being built," he said.

"And with higher interest rates set to restrain demand from 2020, population growth may not prevent house prices from eventually falling, perhaps by around 10 per cent."

That might sound alarming, but then again it is more like a dint in the double-digit rises over recent years in Sydney and Melbourne markets than a calamitous write-off.