Capital city house prices fall at fastest pace in 15 years, led by Sydney, Melbourne: ABS

Capital city housing prices are falling faster than at any time in the past decade and a half, official figures show.

Prices dropped 5.1 per cent on average across the eight capital cities over the year to the December quarter.

This was a steeper decline than at any time since the ABS began keeping records in 2004, including during the global financial crisis when prices dropped 4.6 per cent annually in the March quarter of 2009.

Sydney prices fell 7.8 per cent over the past year, worse than the 5.3 per cent drop in the December 2008 quarter.

Melbourne lost 6.4 per cent, eclipsing a 5.4 per cent fall in the December 2011 quarter.

The two largest cities are leading the price falls even as the downturn takes hold around the country, ABS chief economist Bruce Hockman said.

“While property prices are falling in most capital cities, a tightening in credit supply and reduced demand from investors and owner-occupiers have had a more pronounced effect on the larger property markets of Sydney and Melbourne,” Hockman said.

The falls come after a five-year boom, with Sydney prices lifting 68 per cent and Melbourne rising 54 per cent over the five years to December quarter 2017, he said.

Banks have become more cautious about making home loans, under pressure from the bank regulator and the financial services royal commission, and have been more carefully scrutinising borrower expenses and curbing the size of loans offered.

Prices also fell in Brisbane, down 0.3 per cent over the past year, and Darwin, down 3.5 per cent. The resources-affected Perth market continued to slip, falling 2.5 per cent.

Only three capitals posted price growth during 2018.

The relatively affordable Hobart jumped 9.6 per cent, although the city’s growth has slowed since mid-last year when it was running at a hot 15.5 per cent annual pace.

Adelaide prices rose 1.5 per cent and Canberra lifted 1.8 per cent.

The total value of Australia’s dwellings fell by $268.4 billion over the past year to $6.7 trillion, the ABS said.

Across the country, the mean dwelling price fell to $651,100, while the NSW mean dropped to $831,800 and the Victorian mean slipped to $690,900.

A chorus of economists expect prices to keep falling amid the clampdown on bank lending and uncertainty created by the looming federal election, which could see changes to tax concessions for negatively geared properties if the Labor opposition wins.

The recent Domain House Price report for the December quarter found Sydney house prices fell 9.9 per cent over the past year to a median $1,062,619 and Melbourne house prices fell 8.4 per cent to a median $833,321.