Residential property prices dropped 2.4% in the December quarter, led by Sydney and Melbourne, according to figures released by the Australian Bureau of Statistics (ABS) on Tuesday.
These declines come after a period of solid growth in which Sydney prices rose 68%, and values in Melbourne climbed 54% over the five years to the December 2017 quarter.
The data also showed that values were dropping faster than during the global financial crisis. Sydney property prices fell 3.7% in the December quarter and have continued to slide since the September quarter of 2017 — marking the city’s worst performance since ABS started collating figures in 2003.
Melbourne property prices, meanwhile, recorded the fourth consecutive quarter of drops (-2.4%).
"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," said Bruce Hockman, chief economist for ABS.
Angie Zigomanis, senior manager for BIS Oxford Economics, shared a similar analysis, noting that investors were a vital driver of the price growth through the upturns of both Sydney and Melbourne.
“The fall in investor demand is now underpinning the decline in prices,” he said.
The weakness in prices will continue to play on purchaser sentiment through 2019, with more price drops in Sydney and Melbourne expected, according to Zigomanis.
The decline was not limited to the nation's two largest cities. Brisbane property values were down by 1.1%. Perth (-1%), Darwin (-0.6%), and Canberra (0.2%) also tracked downwards. On the other hand, Adelaide and Hobart were the only markets that recorded positive growth in 2018.
ABS also revealed that through the year, growth in residential property prices fell by 5.1%. Drops were logged in Sydney (-7.8%), Melbourne (-6.4%), Darwin (-3.5%), Perth (-2.5%) and Brisbane (-0.3%).
The total value of Australia's 10.3 million residential dwellings decreased by $133.1 billion to $6.7 trillion. The mean price of homes in Australia is now $651,100.
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