House price growth has almost ground to a halt across the country, sinking to an average of 0.2 per cent for the December quarter.
That compares to an average 8.7 per cent growth for the preceding 12 months, according to figures released by the Australian Bureau of Statistics (ABS).
Sydney saw the biggest turnaround with prices falling 1.6 per cent for the quarter, compared to an overall rise of 13.9 per cent for the calendar year of 2015.
Melbourne prices grew by just 1.6 per cent compared to 9.6 per cent for 2015.
However, Melbourne and Sydney appear to have staged recoveries into 2016.
Figures from CoreLogic RP Data show Melbourne prices up 3.3 per cent so far in 2016, while Sydney is up 1.9 per cent. However, with both markets weakening, that recovery could be short-lived.
The ABS figures show Canberra as the strongest market, up 2.8 per cent in the December quarter, followed by Hobart at 2.5 per cent. The biggest slip was in Darwin where the average price fell 1.8 per cent.
Angie Zigomanis, property analyst with research house BIS Shrapnel, said he was not surprised at the overall figures and that a number of surveys had shown weakness in Sydney in the December quarter.
“We expect modest growth to the end of the year in Melbourne and Sydney,” Mr Zigomanis told The New Daily.
“Brisbane is treading water with a weak economy and Adelaide is flat for the same reason.
“The strength in Canberra and Hobart is surprising and prices rose more than we would have expected. In Canberra, government austerity has been less than we expected. Given that Canberra is almost a university town, the growth in overseas student numbers in the last year or so could be influencing housing demand also.”
Strength in Hobart is being driven by migration into the state and also from regional centres to the capital, Mr Zigomanis said.
Perth is being negatively affected by the end of the mining boom as is Darwin, he said.
Overall, the average residential property price across the eight capitals is $612,100 and there are 9.61 million residential properties in Australia valued at $5.8 trillion.
The ABS figures also break down housing into free standing homes and apartments and, as expected, the apartment market is considerably the weaker of the two.
Mr Zigomanis said there could be some fallout in the housing market from the upcoming federal election.
“If the Coalition wins it will be ‘steady as she goes’ but if Labor wins and they introduce their new negative gearing policy there might be some impact,” he said.
That impact would be small but would see a jump in prices as investors move in prior to the introduction of the negative gearing restrictions.