Selling our current house and renting for a little while was something we considered earlier this year and we are still keeping it as an option. There is one major impediment to doing so, and one of the reasons I don't think property will come down too quickly or at all in nominal terms.
The transaction costs in Victoria are simply too high for owner occupied housing. Stamp duty on a $900k house is in the neighborhood of $50k, and then you have to pay all the selling costs on top of that. You would have to have prices come down a bit to really benefit and then add all the hassle of shifting house twice in a couple of years. We decided it wasn't worth it, particularly when we didn't think house prices in Melbourne were rational in the first place and thought there was some chance if it continuing that way.
The transaction costs in housing mean that you really have to make good choices and then stick with it as you really can't afford to change you mind after a while - at least for normal working types! Its these sticky prices that will provide some support to house prices. Until at least something really bad comes along.
