Home price growth in the capital cities has continued to slow on a quarterly basis, weighed down by tighter lending by the big banks and easing market conditions in Sydney.
Sydney home prices fell 0.6 per cent over the quarter and were down 0.5 per cent over the month, figures from property data group Corelogic show.
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A brief look at how property tenure has changed over the last 25 years.
It marks the first rolling quarterly fall in Sydney since May 2016 when the first round of tighter borrowing requirements were still working their way though credit policies. It is the second month in a row Sydney prices have retreated after they slid 0.1 per cent in September.
Home prices in Darwin and Perth were also down, 4.4 per cent and 0.7 per cent respectively, over the quarter. Melbourne's market conditions remain resilient compared to Sydney, with home prices up 0.5 per cent for the month and reaching growth of almost two per cent over the quarter.
"Seeing Sydney listed alongside Perth and Darwin, where dwelling values have been falling since 2014, is a significant turn of events," Mr Lawless said.
Despite the recent downturn in values, Sydney home prices are up 74 per cent since the growth cycle began in early 2012.
Mr Lawless said home prices across regional NSW are outperforming Sydney, with values up 9.7 per cent over the past twelve months, led by the Newcastle and Lake Macquarie region.
"Growth has rippled away from the Sydney metro area as affordability challenges constrain demand," he said.
"Buyers are attracted to lower price points and lifestyle opportunities of the adjacent areas where commuting is still an option."
Driving Melbourne's growth is Victoria's record breaking migration rate which is creating unprecedented housing demand, as well as strong jobs growth and a healthier level of housing affordability, relative to Sydney.
But Mr Lawless warned, despite the growth, Melbourne home prices are now rising at their slowest quarterly pace since mid-2016.
Nationally, home values were flat over the month and up only 0.4 per cent over the three months to October 31.
That compares to a 0.7 per cent rise recorded over the three months to September.
National home value growth also slowed, up a mere 0.3 per cent in the October quarter compared to 0.5 per cent recorded in the three months to September.
Mr Lawless said the slowdown in the pace of capital gains was primarily due to tighter credit policies which have fundamentally "changed the landscape for borrowers".
"Lenders have tightened their servicing tests and reduced their appetite for riskier loans," Mr Lawless said on Wednesday.
Interest only borrowers and investors are facing premiums on their mortgage rates which are likely to act as a disincentive, especially for investors who are generally facing low rental yields on investment properties, he added.
Hobart was the best performer with dwelling prices up 3.3 per cent over the quarter, as investors from Sydney and Melbourne turn to Hobart's market where housing prices are substantially lower than those in Australia's largest cities.
AAP