Victoria's housing market remains soft - but it may be bottoming out. Credit:Wayne Taylor

The Victorian government says the worst of Melbourne’s property crash may be over, with the downturn showing signs of ‘bottoming out’.

The comments by Victoria’s top economic bureaucrat come as a leading housing economist predicts a small bounce in the market, with the federal election over and interest rate cuts tipped.

But the fall in real-estate prices, which have now seen the largest annual decline on record, is still expected to cause a big hit to the government’s bottom line as it prepares to unveil its budget next week.

David Martine, secretary of the Department of Treasury and Finance, says some of the latest data is cause for optimism with more home loans being written, more houses selling at auction and decelerating price declines.