Australia's residential property market is unlikely to drop further - with a few notable exceptions - according to a panel discussion organised by Standard & Poor's in Sydney yesterday.The consensus outlook was for a flat 12 months, followed by positive growth in all Australian markets, for both houses and units."A lot of the positive announcements recently: the [RBA cash] rate cuts; removal of the debt serviceability floor and greater certainty around property related taxes, will really help on the demand side," said Erin Kitson, director of structured finance ratings at S&P Global Ratings."But this will be constrained by a more cautious household sector. We still have weak wage growth and a high level of household indebtedness," she said."Mortgage arrears in our portfolio, that is those loans that are more than 30 days behind, are still at relatively low levels compared to international markets, but there has been some deterioration."More worrying for the S&P analysts are the more severe arrears - that is, those that are more than 90 days late. Fifty per cent of these originate in the mining states of WA and non-metro Queensland. Property prices are a risk factor for residential mortgage-backed securities holders, Kitson agreed. "However, one of the major factors for RMBS is loss of income, so the employment story is what matters most from a debt serviceability perspective."Phil White, chief executive officer, QBE Lenders' Mortgage Insurance: "What we have seen with property prices is not a cyclical correction. It is a man-made correction, contrived by the regulators to an overheated market particularly in Sydney and Melbourne. "The [regulators] achieved that through restriction of mortgage credit. Pre-GFC credit growth was 17 per cent, and up to 20 per cent. It is recently at 2.75 per cent," White said."We are still seeing losses from 2014, the peak of the market. It takes five years for these sorts of peaks to work their way through."Sharad Jain, S&P's director for financial institutions ratings responded: "We don't think banks will start lending at 2014 or 2015 levels. We think credit growth will remain subdued, up to about 4 per cent growth in the next year."Paul Mirams, partner in the real estate practice at KordaMentha, suggested the property market has turned a corner in Sydney and Melbourne - for existing dwellings."We don't believe we've seen the bottom of the [slump in] new apartments," Mirams said.[therefore] .... the risk of settlement defaults will be highest in the next 18 months or so, and not in the last 18 months."