The total value of Australia's 10.1 million residential dwellings fell by $70.1 billion to $6.8 trillion during the September quarter, latest Australian Bureau of Statistics figures show.
Residential property prices dropped 1.5 per cent in the quarter, taking the mean value of Australian dwellings to $675,000.
Capital city heavyweights Sydney and Melbourne continue to lead the trend, with Melbourne property prices recording the third consecutive quarter of falls, down 2.6 per cent, and its first annual price fall of 1.5 per cent since the September quarter in 2012.
Sydney property prices recorded a drop of 1.9 per cent for the quarter, and a 4.4 per cent decline year-on-year.
ABS chief economist Bruce Hockman attributed falling property prices and tightening credit availability as weighing on activity in both investor and owner-occupier markets.
“Results are in line with market indicators, with auction clearance rates and sales volumes falling and days on market trending higher,” Hockman said.
“Falls in Sydney and Melbourne are no longer confined to the more expensive properties, with declines now being observed in the middle and lower segments of the market.”
OECD's latest economic survey of Australia report described Australia’s housing market as “a source of vulnerabilities due to elevated prices and related household debt” with the nation potentially facing economic challenges “if not handled well”.
Despite ongoing coverage of instability in the sector, Goldman Sachs economists believe Australia’s housing market is much more robust than other forecasts, with Goldman Sachs describing a property market crash or credit crunch as “overstated”, in a research note this week.
ABS stats show residential property prices continued to moderate through the year with a 1.9 per cent decline. Falls were recorded in Darwin, down 4.4 per cent, and Perth which saw a 0.5 per cent drop.
House prices record largest drop in seven years
Real Estate Institute of Australia's Malcolm Gunning said the latest REIA figures for the September quarter show the weighted average median price for houses saw the largest fall in almost seven years.
Gunning said falls were seen in all capital cities except for Brisbane and Adelaide. ABS stats recorded modest improvements of between 0.5 and 0.6 per cent for the quarter.
Reflecting the squeeze on loan approvals over the past 12 months, Gunning said loan numbers fell by 11.9 per cent across Australia, with loans to first home buyers dropping by 3.7 per cent.
“The size of loans has also fallen with the average loan across Australia dropping by 1.8 per cent, the largest quarterly decrease since March 2017.”