The residential property market seems finely balanced at the moment. Sales volumes continue to be constrained, with September's sales down another 2.3 per cent year-on-year after dropping 13 per cent and 23 per cent in 2016 and 2017 respectively — but this was only the second time that volumes have dropped since the start of the year: I believe we've essentially reached a floor.

This is backed by credit flows, which have actually increased over 2018 — suggesting that the market has adjusted to the overall tightening over the last two years, with buyers managing to raise the required deposits, survive greater scrutiny on their income and expenses and satisfy stricter serviceability tests.

According to the CoreLogic Buyer Classification series, both first home buyers and multiple property owners actually increased their share of nationwide sales in Q3, and their relative strength indicates a general market confidence for those who are able to secure the required finance.

This confidence will stem from a strong labour market, forecasted GDP growth (even if it's slowing) and low interest rates — both current and forecasted. Plus, we have a possible relaxation of the LVR limits on the horizon, which could add to market demand.

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The balance then, comes from the continued focus on property investors — most recently in the form of the Tax Working Group's interim report.

The group seems to favour recommending some form of tax on capital income, but it has to balance a number of considerations, not least administration and compliance costs, on top of dealing with the complexities in how to treat the different types of capital assets.

In a recent seminar headed by the Working Group's chair Sir Michael Cullen, it was estimated that 75 per cent of their time between now and February, when the final report is due, will be spent on the capital income recommendation. So there's a lot more discussion to be had, and still no guarantee the final recommendation will include a capital asset tax, let alone be pursued by the current coalition Government.

It's fair to expect that any further taxes will negatively impact the market, meaning profits and subsequently the attractiveness of investment property will reduce, but I don't think seasoned investors will be completely put off.

It may well add an extra barrier for a newer generation of potential property investors, who may increasingly opt for other investment vehicles, including term deposits, commercial property, the sharemarket or even the US stock market. But we're a long way from that investment behaviour change eventuating.

Overall, as always, there are positives and negatives, but the balance of evidence currently available suggests to me that the worst is over for property market activity.