It's not supply & demand for housing that determines house prices, it's supply & demand for finance. As housing credit expanded house prices rose and now as housing credit contracts house prices are declining; https://www.*.com.au/australian-property-home-loan-growth-credit-restrictions-2018-11
So we're not only seeing more and more borrowers going underwater we'll also see more and more houses flooding the market as both investors and owner-occupiers try to exit the market en masse. Combine this with stricter lending conditions from banks and fewer borrowers willing or able to borrow a deflationary spiral will quickly develop.
Governments, regulators and banks invariably re-act to market conditions near the end of the trend thereby causing more harm than good. The horse has already bolted from Australia's housing bubble so there's no point in shutting the gate now.
