SYDNEY • Australian home prices skidded nearly 5 per cent last year, marking their worst year since 2008, led by tighter credit conditions and waning investor interest, and analysts expect the weakness to persist this year.
Property values across the country fell for the 15th consecutive month in December, with the rate of decline in Sydney and Melbourne - the two largest markets - worsening over the year, according to property consultant CoreLogic.
Its index of home prices nationally dropped 1.8 per cent last month from November, and tumbled 2.3 per cent for the quarter - the worst quarterly decline in eight years.
Values in the combined capital cities fell 1.3 per cent in the month and 6.1 per cent for the year. Sydney was the worst-performing capital city with prices down 1.8 per cent last month. Regional centres fared better, with prices outside the cities staying almost flat.
"Access to credit has been the most significant factor weighing down housing market conditions over the year," said Mr Tim Lawless, head of research at CoreLogic.
Since 2015, regulators have clamped down on risky lending by banks, particularly for interest-only loans, while a raft of scandals amid a high-level government-mandated inquiry has added to an air of caution.
Last year, Australia's prudential regulator did ease some of its lending restrictions, but Mr Lawless said access to finance was likely to remain "the most significant barrier" to an improvement in housing market conditions 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 inquiry," he said.
The slowdown has been greatest in Sydney where home prices stumbled nearly 9 per cent on the year, though Melbourne was catching up with an annual drop of 7 per cent.
Sydney and Melbourne comprise about 60 per cent of Australia's housing market by value and 40 per cent by number.
Rental market conditions were also generally subdued, with weekly rents unchanged over the year across combined capital cities.