Despite a slew of negative economic news and a forecast of a severe downturn in the housing market, property prices have continued to display exceptional resilience, according to RP Data.

The latest RP Data-Rismark International National Property Indices report showed overall property values falling by only 2.6% during the 2008 calendar year. Including rents, the total returns to residential property were actually positive in 2008, the report said.

The property market - when compared to the US prices which have plunged by more than 25%, the ASX All Ordinaries which lost 45% and the Listed Property Trusts which declined by 55% - has performed extremely well, according to Tim Lawless, national research director with RP Data.

"The robust performance of the Australian residential markets can largely be attributed to a critical undersupply of dwellings across the country's capital cities, which Westpac estimates to be 140,000 homes and growing as well as the record population growth which is forecast to continue through 2056. In addition to Australia's very strong banking system and historically low mortgage default rates, Australia's residential market has been one of the best performers internationally," said Lawless.

Matthew Hardman, Rismark International head of research, said that while unemployment looks set to rise to 7%, this will be offset by the record low interest rates combined with the government fiscal stimulus and housing subsidies.

"Low interest rates and the continued serious undersupply of housing in Australia will continue to hold a floor under capital city residential values in the lower and middle segments of the market," he said.