Need advice on current investment property issue.

What you need to consider is how much the property is costing you to hold it each year.
Say your rent is  17940 a year and the interest costs are about $26,000 (guess) then you have to find about $11,000 a year assuming $3000 a year for extra expenses.
4 years * $11,000 = $44,000
Say another 4 years without growth = $44,000
say 30% marginal tax rate . $61,000 out of pocket expense taking 30% tax claim on the 88,000 over 8 years

So you need to make $380k + $72,000 = $452,000 taking capital gains tax into account at 30% plus 50% discount in eight years
time to break even. this is about 18% growth
IF the market turns around this could be achieved but I do not own a crystal ball so I can't predict if this will occur and if so when it will occur, so what you need to consider is can you afford the cash flow cost of $11,000 (or whatever this figure works out to be) a year hoping that the market changes over the longer term time frame of 4 to 10 years.

If you sell it  you can carry the capital loss over to use against the next property that hopefully makes a capital gain in the future for you.
But if you are selling it,  you will have to make up the difference up between the loan amount and the proceeds from the sale if less than the loan amount balance.
What also may need to be considered is if the bank will accept the LVR of the loan increasing as the value decreases.

What also has to be considered is the property falling in value each year or has it stabilised with zero growth at the moment or will it fall in value next year. (consult with your crystal ball as hard to predict )

I can't give you specific financial advice as I am not a licensed financial adviser but rather I have given you a way to tackle and assess your cash flow and for you to decide if you can afford the cash flow loss each year.

I live in Forest Hill Vic and my neighbors wanted $510,000 for their house and only got $410,000 at auction so it really is the state of the current property market cycle at the moment. You could put it to Auction and get the same result or worse get no sale.

The property market will not go back up until at the very least 2010.
This is a very optimistic already. Expect the housing market to bottom out around 2011-2021, depending how much the government is planning to mess with this crisis. The more messing , the longer it will take.

Average houseprices = 4* average income.
Sydney average houseprices = 550.000
Average income = 50.000
Houses are overpriced. pricesdrops of 50-60% are needed in real terms.
Wages will fill the gap after prices drop 40%.

Can you endure a 40% drop in housevalue ?

( I took sydney as an example, but it could be any town, most towns are at 10* average wages )

Won't go up until 2010 but will bottom in 2011-2012 ?  Man, you are more messed up then I thought.
If you're earning $50K then forget about the $550K houses, you belong in Fairfield in a $300k house. Better still, grab yourself a flat for under $200K and pay that off first. 

40% drops in Sydney ?  I think you're starting to believe your own propaganda.   You want 40% discount try Cobar or Hopetoun, you could get "lucky" in there.

walp,

You need to consider as mentioned by duckster your holding costs.

If it is CF+ and you don't plan on selling them why worry?  If it is slightly CF- then depending by how much you may want to consider your options.  If you sell you have lost at least 60K but if you don't sell how long will it take for you to lose 60K if CF-?  Is the rent fair for the area?  Have rents dropped, stayed the same or gone up in that particular area?