The worst of the housing slump may have passed as the drop in prices eased in April, new analysis shows.

While the downturn has slowed, property prices still continued to fall in every capital city except Canberra, according to CoreLogic’s Home Index for April.

The national median home price dropped just 0.7 per cent in the month, well below the 1.8 per cent drop in December when the downturn was in full swing.

CoreLogic’s head of research Tim Lawless said the easing of price drops showed the market might be gradually recovering.

“The current trend in the data implies that housing market conditions may have moved through the worst of the downturn,” he said.

“Values are still broadly declining. However, the pace of decline has moderated since December last year, and there are some tentative signs that credit flows have improved, albeit from a low base.

“Although the rate of decline has moderated, we are still seeing values falling across most regions of Australia, and any recovery in dwelling values is likely to be a long-term outlook.”

The factors supporting an improvement in conditions include a rise in mortgage activity, a modest gain in housing finance approvals and slight strengthening in auction clearance rates. Last weekend, they were 57 per cent in Sydney and 56 per cent in Melbourne, the analysis showed.

“Considering that tighter credit conditions were one of the primary catalysts for the housing market downturn, any sign that credit availability is improving would be a welcome outcome for the housing market,” Mr Lawless said.

Across every capital city except Canberra, prices fell: A 0.7 per cent drop in Sydney, 0.6 per cent in Melbourne and 0.4 per cent in Brisbane.

Darwin led the pack with a 1.2 per cent drop, while Perth continued to slide at 0.4 per cent and Hobart, which had previously bucked the trend, dipped 0.9 per cent.

Canberra stood out with an 0.4 per cent gain.

Outside the capital cities, values fell everywhere bar regional Victoria, Tasmania and South Australia.

Geographically, more places across the country were recording negative growth as buying sentiment waned, CoreLogic’s Cameron Kusher said.

“Accessing finance remains difficult and as values continue to fall broadly across the country, sentiment towards purchasing a property has waned.

“Furthermore, rental pressures are easing, which reduces the incentive for people to move from renting to ownership”

The rate-cut factor

With the downturn continuing and consumer price figures indicating inflation is well below where the RBA wants it, analysts are increasingly tipping a rate cut next Tuesday.

Mr Kusher said it seemed likely we would see a rate cut, at least within the next few months.

“A cut in interest rates hands more money to borrowers, but is unlikely to drag more buyers into the market,” he said. 

“The reason being, that lenders are assessing people’s ability to repay a mortgage on an interest rate above 7 per cent, when many borrowers are getting new mortgages around or below 4 per cent.

“The most effective way to increase demand and do it in a controlled way is to gradually reduce the mortgage serviceability cap from above 7 per cent.”