On the other side of Port Jackson in Wilfield Avenue in Vaucluse, a plush four-bedroom home went for $2.9 million in 2010. Last June it was resold for $2,550,000.

On the other side of the city, also in 2010, an ordinary-looking brick house in Blakehurst, a suburb south of Sydney Airport, sold for $880,000.

Twenty months later, in May this year, it was on the market again. This time the Californian bungalow fetched $850,000, a discount of $30,000 for the new owner.

These homes illustrate the change in market conditions confronting spring vendors and buyers.

Home hunters are faced with purchasing in a market where prices have softened for the past two years and sellers are questioning whether it is the right time to put a hoarding out in front of the family residence.

A swag of reports released this week suggest Australia's residential property market is still vulnerable to global economic conditions and wary, downbeat consumers.

Buyer interest remains soft, sales activity is at historically low levels and the stock of unsold homes at near-record highs, the ANZ's Australian Property Outlook says.

High-profile business failures, insolvencies and job cuts have heightened concerns over job security in many areas, prompting households to focus on paying off debt, it says.

Darwin is the only capital city where house prices have risen over the past two years, says SQM Research's Housing Boom and Bust report. Melbourne suffered the most pain over the same period, recording a 3.8 per cent fall in values over two years to June this year, SQM says.

Falling prices have removed the urgency for first-home buyers to jump into the market and dampened investors' enthusiasm for property, two key home-buying groups.

For an industry that relies on glossy brochures, sparkling picture-perfect homes and smooth-talking estate agents to sell houses, it's not the kind of assessment many want to hear.

''Everyone is doing it tough, there's no question about it,'' says Mike McCarthy, the head of one of Melbourne's largest real estate franchises, Barry Plant.

His views are echoed by a Sydney buyer advocate, Patrick Bright. ''I can't remember it being as tough as this to transact,'' he says, pointing to the fact that sales volumes are at 15-year lows.

Melbourne, too, is suffering a sales slump. Figures from the Valuer General show metropolitan home sales fell to a 15-year low in 2011.

Preliminary figures suggest total sales will fall further this year, marking a new low.

But even before the Melbourne Storm take on the Canterbury Bulldogs and the Sydney Swans battle the Hawks this weekend, there's a clear winner between the two cities.

Off the field in the leafy suburban streets where homes are being auctioned or sold privately in the spring sunshine, by some key indicators Sydney is out-performing Melbourne.

''Following modest price declines earlier in the year there is some evidence that the Sydney housing market is stabilising,'' the ANZ reports.

Sydney's acute housing shortage appears to be propping up rents and prices. Rental vacancy rates are low and likely to contract; at last count they were 1.6 per cent, and returns rose 5 per cent over the year to June, according to SQM.

Median rents now sit at $420 for a three-bedroom home.

By contrast, Melbourne's vacancy rates are on the way up, beyond their present level of 2.3 per cent. And over the past year, the city has had almost no rental income growth.

The difference is also evident in trendsetting suburbs.

Median house prices in Sydney's chic inner-city Chippendale rose 19 per cent over the past year to $905,000, whereas values in up-and-coming Brunswick in Melbourne fell nearly 7 per cent to $633,000, according to the property analysts RP Data.

With auction clearance rates consistently staying above 60 per cent, there is a tangible spring buzz in Sydney. Olympian Matt Shirvington will be hoping that energy plays in his favour after listing his 1897 home in Canrobert Street, Mosman, for auction next week.

Shirvington bought the property for a bullish $2.5 million in 2008.

''Anything that's priced around the median price for a particular suburb is selling,'' says the buyer advocate Bright. However, once a vendor lists their house for 20 to 30 per cent above the median price for their suburb, buyers thin out and activity slows, he says.

One project to ride the recent lift in energy was the $440 million redevelopment of the Swiss Grand Hotel in Bondi. All but two of the 76 apartments in the first release in the Pacific development sold on the opening weekend earlier this month. The sale also got property players at the prestige end speculating the slump was over.

One buyer is now doing due diligence on buying two off-the-plan penthouses in the development and merging them into one apartment, said CBRE's Justin Brown.

''If that occurs, it will break the Australian record for a single apartment and be well over the $20 million price range,'' he said.

After two ordinary years, the prestige market in Sydney is gaining some confidence, the veteran agent Bill Malouf believes.

More properties were selling during the marketing period, rather than three months after the initial campaign, he said.

''I think the general public has realised they're not going to get flooded with a whole lot of stock.''

But high-end homes were still selling at a discount. LJ Hooker is asking for $8 million for a palatial Point Piper apartment that previously sold for $8.5 million.

While Sydney's residential construction industry suffocated under restrictive planning policies and land shortages over the past decade, population and price pressures super-charged Melbourne's apartment and new home market.

That boom is now unwinding.

The scrapping of first-home buyer grants and falling immigration has resulted in land sales plummeting and high-rise projects coming off the boil.

''Whilst there is a glut of stock, it's dead stock,'' McCarthy says.

''The problem is there's not enough new stock coming on. We're actually selling all we can get our hands on in terms of new stock - there's just not enough of it.''

Both Sydney and Melbourne are unlikely to see any super Saturday auction weekends this year, when more than 1000 properties go under the hammer, a common feature of booms.

This week, both cities' year-to-date clearance rates (the proportion of homes sold at auction) equalised at 60 per cent, well up for both on last year's performance.

''Consumers are still sitting on the sidelines waiting. The market in some respects is in a bit of a holding pattern,'' says Robert Larocca from the Real Estate Institute of Victoria.

That won't matter this weekend, as auctions stall in both cities as punters transfix on the AFL and NRL grand finals. But it will be a factor in following months.

There is a strong risk that with fewer homes selling and many first-home buyers and investors sitting on their hands, Australia's big banks will be tempted to lower their mortgage benchmarks as they slug it out to attract customers and take market share from rivals.

That's a scenario the Reserve Bank appears keen to head off, before a possible cut in official interest rates on Tuesday.

The markets are factoring in a 66 per cent chance of a rate cut , and four more to follow by this time next year.

In uncharacteristically forthright language, the Reserve Bank's Financial Stability Review this week warned banks against the lure of relaxing standards.

''With demand for credit likely to remain moderate, a challenge for firms in a competitive banking environment will be to resist the pressure to ease lending standards … in the pursuit of unrealistic profit expectations,'' it said.

But the Reserve was less concerned with the flip side of fewer home hunters taking on new mortgages, and our continued obsession with thrift and paying off debt.

The ''consolidation of household balance sheets'' was ''desirable'' for financial stability and would make indebted households better able to cope with any future income shock or fall in house prices, the Reserve Bank said.

Households are going to ''keep on correcting their debt levels downwards for some time,'' says Kim Hawtrey, a director with the economic forecaster BIS Shrapnel.

People are going to be ''relatively unresponsive to interest rates cuts'' compared with previous times when the Reserve slashed interest rates. Any pick-up in home buyers' responding to a rate cut ''will take longer and be somewhat muted'' because of Australia's economic situation, Hawtrey says.

That wariness is obvious among buyers, Bright says.

People have stopped stretching themselves, he maintains.

''Instead of borrowing up to their eyeballs, they're coming in with bigger deposits.''

According to the Reserve Bank, which recently quizzed the major banks about the health of their loans, 15 per cent of borrowers are ahead on their mortgages by two years or more.

''Many borrowers still have sizeable buffers,'' the Reserve said.

In NSW, the number of forced home sales by mortgagees is averaging 213 a month. That figure is well above last year's monthly average but below its peak in 2010, when borrowers were really stretching themselves.

Repossession numbers are murkier in Melbourne, Supreme Court figures show.

House and land repossessions peaked at 2051 in June, higher than preceding years.

A surprising number of home owners who purchased a property in 2009-10 may well be in a situation of negative equity, said a buyer advocate who is based in Melbourne, Paul Osborne.

''This would be compounded by the further out the property is from the city centre - or if the property is, say, a brand-new apartment,'' Osborne said. Some of the largest falls in resales since 2010 have occurred in Melbourne's leafy eastern suburbs, he said.

The struggle to stay on top of mortgage repayments is showing up in well-to-do localities.

A week ago, the blue-chip Woollahra home of Sydney couple Belinda Tassone and Nick Leach, the former chairman of the failed airline OzJet and the firm HeavyLift, sold in a mortgagee auction for $5 million.

The Tassone family purchased the property in 2004 for $6.15 million. It was first listed in March with price expectations of $13 million.

Last Saturday a house in the popular bayside suburb of Port Melbourne was snapped up for $845,000 after a mortgagee auction.

The single-fronted weatherboard cottage on Farrell Street was purchased in February by the now bankrupted owner for $912,500.

Earlier that morning, the couple who bought the property had missed out on a similar home around the corner on Clarke Street that sold at auction for $1.025 million.

In Melbourne, buyers were more inclined to ''wheel and deal'' after auction than bid during it, in the hope of getting a better deal, a buyer advocate, Frank Valentic, says.

Vendors were still struggling to understand that the market has changed and were not setting reserves that resulted in sales, says a veteran Melbourne real estate agent, Iain Carmichael.

Home sales were now being driven by family choices around schools, people relocating for work or couples upsizing or downsizing, rather than opportunism.

''That's what a market should be about. It was just that it was so unreal for so long,'' Carmichael says.

''Previously you'd get vendors saying, 'crikey, our house is now worth so much more, we'd better sell'. Now they're saying, 'we'll just sit tight.'''

There was some evidence that consumers had become more positive in the past month, but ''you need several months of that before you can call it a trend,'' Hawtrey said.

''There are green shoots coming through the concrete but you can't see the whole field growing again,'' he believes.

In the present property market, baby boomers were in a particularly awkward situation, according to Bright.

Those wanting to downsize had typically owned their sizeable family home in a nice suburb for the past 30 years.

As well as having their super docked by falls in equity markets, they were looking to sell at a time when the higher end of the market was weaker and the lower end stronger.

''If you're downsizing, you're selling at a bigger discount than you are buying at,'' he says.

The biggest future threat to the property market will be the mining downturn and its impact on trade, SQM's Louis Christopher maintains.

Despite that, Christopher predicts the remainder of 2012 and 2013 is likely to see a recovery in home prices.

''The recovery will initially be modest, but at some point it may well accelerate … Our opinion is that this will occur in Sydney and Darwin,'' he says.

The Housing Boom and Bust report flags the top 20 fastest income growth suburbs as potential future hot spots.

Localities such as Waterloo, Redfern and Darlinghurst feature in Sydney. Several, including Fremantle, Jerdacuttup and Kings Park in Western Australia are mentioned. Fortitude Valley and New Farm are pinpointed in Brisbane.

However, no suburbs are mentioned for Melbourne.

High income growth is usually the main contributor to property prices, Christopher says.

''The demand for housing in these areas has put an upward pressure on house prices as the supply of housing in the inner ring localities is commonly restricted.''

The ANZ's property report also backs a recovery in the Northern Territory and WA, where house prices may be ''reaching a floor''.

Housing in Sydney is at its most affordable (excluding the global financial crisis period) since 2001, ANZ says.

''The dynamic of rising rents along with improved purchase affordability should encourage both first home buyers and investors into the purchasing market,'' it suggests.

But prices in states with weaker economies - Hobart, Melbourne and Canberra in particular - ''remain susceptible to further falls,'' the bank says.

So should home hunters buy now?

''I get asked all the time, 'Should I hold out? When should I buy?''' Bright says. ''If you're buying with a medium- to long-term outlook - get on with it.

''If you're buying and selling in the same market conditions, it's irrelevant whether the market has hit bottom or not.''