Sydney property market outperformed by Melbourne and Hobart

Sydney has joined depressed markets Perth and Darwin as the only capital cities to experience a drop in housing prices in the past three months.

A report by CoreLogic noted the national market has been losing momentum since its peak last year (November 2016).

"The slowdown in the pace of capital gains can be attributed primarily to tighter credit policies, which have fundamentally changed the landscape for borrowers," CoreLogic's head of research Tim Lawless said.

"Additionally, 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."

When looking at the national housing market as a whole, growth conditions were flat in October, according to CoreLogic's home value index.

Sydney property still out of reach for many

Sydney dwelling values fell 0.6 per cent in the August to October period.

"Seeing Sydney listed alongside Perth and Darwin, where dwelling values have been falling since 2014, is a significant turn of events," Mr Lawless said.

Perth and Darwin recorded steeper falls in property values during that quarter — down by 0.7 and 4.4 per cent respectively.

Despite that, buying into the Sydney property market still remains out of reach for many aspiring home owners.

Its property values rose 7.7 per cent on a yearly basis, beaten only by Melbourne (+11pc) and Hobart (+12.7pc).

CoreLogic also noted: "Sydney dwelling values are up 74 per cent since the growth cycle commenced in early 2012."

However, the fastest growing capital city was Hobart — with its properties recording quarterly growth of 3.3 per cent, and a yearly increase of 12.7 per cent.

"Hobart is benefitting from renewed housing demand in the form of interstate migration particularly from Sydneysiders and Melbournites," Mr Lawless said.

"[They] appear to be utilising their enhanced wealth positions to buy very well in Hobart."

Aside from Hobart, Melbourne was the other capital city to outperform Sydney — rising 1.9 per cent in the last three months.

When compared to other capitals, Hobart's median dwelling price was the lowest by far at $396,393.

The capitals with the next lowset median prices were Adelaide ($430,303) and Darwin ($437,910).

At the other end of the scale, Sydney's median price was the most expensive ($905,917).

This was followed by Melbourne ($710,420) and Canberra ($582,882).

The national median dwelling price was $543,251, which is higher than Australia's third-biggest city Brisbane ($490,525).

"Overall, performance across Australia's housing market remains as diverse as ever," Mr Lawless said.

However, with household debt at record-highs, a lift in interest rates would contribute to more mortgage stress.

The silver lining is that the Reserve Bank is not expected to announce a rate hike for some time — with some economists predicting it will happen at the end of 2018, or even longer.