A marked diversity in conditions prevailed throughout the previous 12 months, although values across all dwelling classes have continued to rise, according to the latest CoreLogic report.
This rise was underpinned by a slowing growth trend where, towards the end of the year, values began to level out completely.
Sydney saw the sharpest transition, which was previously the strongest housing market over recent years..
Research analyst Cameron Kusher said that values have fallen off in the harbour city.
“Sydney dwelling values were 1.3 per cent lower than their August 2017 peak at the end of November,” the analyst said.
“Most other capital cities have also seen their rates of growth slow recently, with Perth the exception.
“Although Perth dwelling values are lower over the year, there has been a subtle transition towards growth in late 2017, with values 0.3 per cent higher over the three months ending November 2017 — the strongest rate of quarterly growth since June 2014.”
Mr Kusher said that the diversity of the market was most evident in the double-digit-value rise in Hobart (11.5 per cent) and Melbourne (10.1 per cent).
“Although the heat is now clearly coming out of the housing market, Sydney and Adelaide are the only capital cities to see the annual change in dwelling values now lower in November 2017 relative to November 2016.”
He added that this has been driven largely by “significant” shifts in the lending environment.
“Credit growth limits for investors were already in place. However, origination limits were introduced for interest-only mortgages at the end of March.
“As a result of these changed regulatory policies, lenders have begun to charge premiums on the interest rate for investor and interest-only mortgage products.”
In 2018, Mr Kusher said he is expecting a further slowdown in national housing market conditions.
“Credit policies are likely to remain tight as regulators keep a watchful eye out for a rebound in investment credit growth or a reversal in the trend towards fewer mortgages with a loan to valuation ratio of more than 80 per cent,” he said, adding that that interest rates are likely to remain on hold in 2018.
“Higher interest rates would stifle household consumption and business investment and could cause financial distress among a highly indebted household sector,” he said.
“However, rates aren’t likely to fall due to concerns of refuelling the controlled slowdown in the housing market.”
Mr Kusher added that he anticipates national dwelling values to fall further in 2018, driven lower by falls across Sydney and, to a lesser extent, Melbourne.
“After values surged 75 per cent higher over Sydney’s growth cycle and 59 per cent higher across Melbourne, it’s rational to expect some slippage in dwelling values across these cities.”