There are further signs Australia's worst housing downturn in modern history may be drawing to an end, with CoreLogic's monthly index showing further modest price rises in July.

Key points: National housing prices were flat in July, due to a fall in regional markets, but capital city prices were up

National housing prices were flat in July, due to a fall in regional markets, but capital city prices were up Five out of eight capital cities posted modest price increases last month

Five out of eight capital cities posted modest price increases last month CoreLogic's Tim Lawless says he does not think this recovery phase is going to be a rapid one

The company's hedonic home value index showed a 0.1 per cent rise across the combined capital cities last month but nationally, including regional markets, prices were flat.

CoreLogic's head of research Tim Lawless said, nationally, housing prices "may have found a floor in July" and it was the big east coast markets that were generally posting gains.

"We're not really seeing signs of a recovery just yet, but absolutely we are seeing housing prices stabilising," he said.

"We did see values rise last month in Sydney and Melbourne, in July we've actually seen that become a little more widespread — Sydney values are up 0.2 per cent, as are Melbourne values and Brisbane values, and also in Hobart and Darwin we've seen a subtle rise in values.

"Whereas we're still seeing values drifting a little bit lower in Adelaide and in Perth, and [they] also dropped a little bit in Canberra."

'Stimulus for the market'

Mr Lawless said a range of factors had halted Sydney and Melbourne's steep slide in prices, which was the worst property downturn those cities had experienced in decades.

One of those was the federal election outcome, which scuppered Labor's proposed changes to negative gearing and the capital gains tax discount.

"We've seen a lot of that uncertainty around taxation reform taken off the table, which is starting to see investors pricking their ears up once again," Mr Lawless said.

Westpac's consumer sentiment survey has shown a significant rebound in both the "time to buy a property" and "house price expectations" indices.

Mr Lawless said interest rate cuts over the past two months had also boosted demand, along with looser lending restrictions from the bank regulator.

"We are seeing lower mortgage rates, which is providing some stimulus for the market," he said.

"Mortgage rates haven't been this low since the 1950s, so you can see why borrowers are taking advantage of those very low interest rates.

"And they're also taking advantage of the fact that it's become a little bit easier to get a loan in the sense that APRA's revised serviceability assessments are a little bit lower over the past couple of months."

The lowest variable mortgage rates are just below 3 per cent, with most major lenders offering rates between 3.1 and 3.4 per cent per annum, and many offering fixed rates for up to five years for 3.5 per cent or less.

This has shown up in auction clearance rates in the two biggest cities, which are now well above 70 per cent in Sydney and Melbourne — a level typically associated with price increases.

"July saw the best monthly average clearance rates in Sydney since May 2017 and in Melbourne, it was the best since October 2017," observed AMP Capital chief economist Shane Oliver.

'Recovery won't be rapid', expert warns

Mr Lawless said he thought the stabilisation would turn into a recovery in prices, "though it will be quite mild".

"We probably will see values ... edging a little bit higher across most markets, but I don't think this recovery phase is going to be a rapid one," he said.

"There are still some fairly stiff headwinds around the credit space … we are still seeing lenders [being] very conservative, focusing a lot more on individual expenses."

Dr Oliver said there were also economic reasons why house prices were unlikely to take off again, like they did on the previous occasions when the Reserve Bank cut interest rates.

"Household debt-to-income ratios are much higher, bank lending standards are much tighter such that a return to rapid growth in interest-only and investor loans is most unlikely, the supply of units has surged pushing Sydney's rental vacancy rate well above normal levels and unemployment is likely to drift up as overall economic growth remains weak," he observed.

"So we don't see a return to boom-time conditions and expect constrained low single-digit price gains through 2020."

Mr Lawless said, even if there was a return to rapid price growth, regulators would likely be quick to stamp it out.

"If we do start to see an acceleration in housing price growth, particularly from an investment perspective, we probably will see some additional policy levers being pulled in an aim to keep housing markets relatively stable and trying to minimise the upwards trajectory of household debt."