The big two markets of Sydney and Melbourne continue to drive a housing downturn but property data shows last year’s slump went well beyond those city’s limits.
CoreLogic’s index shows national home values fell 2.3 per cent over the December quarter, the worst since 2008, with most regions weaker as national values dropped 4.8 per cent all up last year.
Values dropped down in four of the eight capital cities over the year, led by Sydney (-8.9 per cent).
“Most regions around the country reacted to tighter credit by recording weaker housing market results relative to 2017,” CoreLogic’s research boss Tim Lawless said.
Seven of the top 10 sub-regions returned an annual gain of less than 3 per cent.
The weakest capital city sub-regions were primarily in NSW, with eight of last year’s top 10 weakest capital-city markets.
Weakest regions ranged from agricultural areas where drought and low demand are weighing down the market, to previously strong markets near Sydney, including the Illawarra and the SouthernHighlands.
Mr Lawless said access to finance is likely to remain the most significant barrier this year. “Lenders are understandably risk averse against a backdrop of falling dwelling values, high household debt, rising supply and heightened regulatory focus following the banking royal commission,” he said.
A burst housing bubble remains the greatest risk to the nation's $1.3 trillion economy, according to the OECD, with a hard landing possibly for the already-stagnant property market.
House prices and auction activity have fallen gradually since late 2017, with the Reserve Bank‘s Assistant Governor Christopher Kent blaming the "unnecessary" credit tightening in December for further threatening the market.
Last month APRA announced it was removing a cap on interest-only loans for residential property as it had reached its objective of curbing higher-risk lending.
Mr Lawless said: “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 keep a floor under housing demand.”