Dwelling values shrunk by 4.8 per cent in 2018 when compared to the previous calendar year, marking the weakest housing market conditions since the global financial crisis, according to CoreLogic.
The December quarter saw the largest quarterly decline of 2.3 per cent since the same corresponding period in 2008, with Sydney the weakest performing city (-3.9 per cent) and Hobart the strongest performing city (+2.0 per cent) in the last quarter.
The property data and analytics company said the “accelerated” “downturn” was driven primarily by consistently larger quarter-on-quarter (QoQ) declines in Sydney and Melbourne, but also sluggish conditions in other capital cities and most regional areas.
CoreLogic head of research Tim Lawless said: “Although Australia’s two largest cities are the primary drivers for the weaker national reading, most regions around the country have reacted to tighter credit conditions by recording weaker housing market results relative to 2017.
“The two exceptions were regional Tasmania, where the pace of capital gains was higher relative to 2017 resulting in a nation leading 9.9 per cent gain in values over the 2018 calendar year, and Darwin, where the annual rate of decline improved from -8.9 per cent in 2017 to -1.5 per cent in 2018.”
Dwelling values fell by 8.9 per cent in Sydney in 2018 and by 1.3 per cent across the rest of New South Wales. The median price in Sydney at the end of December was $808,494, similar to what it was in August 2016.
Suburbs in Sydney’s inner west (-8.8 per cent), inner south (-10.5 per cent), inner south west (-10.9 per cent), and south west (-9.3 per cent), as well as suburbs like Blacktown (-9.1 per cent), Parramatta (-10.7 per cent), Baulkham Hills and Hawkesbury (-10.8 per cent), Sutherland (-10.9 per cent), and Ryde (-13.3 per cent) were in the top 10 worst performing nationwide.
In broader New South Wales, Newcastle and Lake Macquarie (-4.1 per cent), Illawarra (-6.2 per cent), and the Southern Highlands and Shoalhaven (-4.0 per cent) experienced the biggest slump in values.
Not all of New South Wales was affected, with Riverina (+3.9 per cent) and the central west area (+3.8 per cent) among the top 10 best performing regions in Australia outside of capital cities.
Like Sydney, Melbourne also saw an annual decline of 7.0 per cent in house prices, with a median value of $646,123 at the end of December. This is close to values seen in February 2017, according to CoreLogic. However, the rest of Victoria saw values rise by 5.9 per cent.
Two of the 10 worst performing areas were in Melbourne, specifically the inner southern and inner eastern suburbs where values fell by 10.5 per cent and 13.4 per cent, respectively.
But not all of Victoria saw declines, with Latrobe-Gippsland (+8.7 per cent), Ballarat (+8.3 per cent) and Geelong (+8.2 per cent), and Bendigo (+4.5 per cent) among the top 10 best performing regions in Australia outside of capital cities.
Home values dropped by 4.7 per cent in Perth, with the median price coming in at $446,011, much like what it was in March 2009.
There was a larger decrease of 7.2 per cent across the rest of Western Australia, with Wheat Belt (-4.9 per cent), Bunbury (-8.8 per cent), and Outback South (-11.0 per cent) among the 10 worst performing areas outside of capital cities.
Sluggish housing conditions were also seen in Darwin in 2018 where prices fell by 1.5 per cent to a median of $416,149, which is about what it was in October 2007.
On the other hand, home values rose by 8.7 per cent in Hobart, reaching a median price of $457,523 by the end of last year, while prices increased by 9.9 per cent in broader Tasmania.
Three of the top 10 best performing areas excluding capital cities were in Tasmania, specifically Launceston and other suburbs in the north east (+11.4 per cent), south east (+8.6 per cent), as well as west and north west (+7.8 per cent).
Canberra also saw an increase in house prices of 3.3 per cent to a median of $601,275, along with Adelaide (+1.3 per cent to a median of $434,924) and Brisbane (+0.2 per cent to a median of $493,568).
South Australia saw a slight increase in home values of 0.3 per cent, while Queensland experienced a slight drop of 0.5 per cent.
One area in broader Queensland, Mackay-Isaac-Whitsunday (+5.1 per cent), made it to the top 10 best performing region in Australia.
However, Darling Downs-Maranoa (-5.4 per cent), Townsville (-5.9 per cent), and Outback (-14.1 per cent) in Queensland were in the bottom 10.
Collectively, there was a fall of 6.1 per cent in dwelling values across Australian capital cities in 2018, and a slight decline of 0.2 per cent across regional markets nationwide.
Mr Lawless attributed this to the declining risk appetite of banks, reduction in foreign buyer activity, decrease in overseas migration, and slight rises in mortgage rates.
“On a positive note, interest rates are set to remain close to historic lows and migration is likely to remain high (albeit lower than last year) which will help to keep a floor under housing demand,” he said.
While regional Australia collectively saw dwelling values dip slightly, CoreLogic said it has been performing better than capital cities likely due to “better housing affordability, more sustainable long-term growth trends and improving economic and demographic conditions.”
Mr Lawless believes limited access to finance will remain the biggest barrier to an improvement in housing market conditions in 2019.
[Related: Delinquencies to rise in 2019: Moody’s]