Capital city house prices fell in the three months to September, driven by the sharpest fall in prices in Sydney in two years.
Average home prices across all eight capitals fell 0.2 per cent in the September quarter, the first decline since the March quarter of 2016, according to the Australian Bureau of Statistics' Residential Property Price Index.
Sydney house prices dropped 1.4 per cent, their largest fall since a 1.6 per cent decline in the December quarter of 2015.
Average prices also slipped in Perth, Darwin and Canberra in the September quarter.
Home values in Hobart rose by 3.4 per cent in the quarter, and also improved in Melbourne, Brisbane and Adelaide.
Average capital city prices are now up 8.3 per cent over the year to September.
The data is confirmation that the housing boom has slowed in recent months, despite continued record low interest rates and strong population growth in major cities.
This comes on the back of the tightening of investor lending rules in March, which forced lenders to increase rates and make investor loans more expensive, amid concerns from the Reserve Bank over rising household debt.
The slowing market has also been apparent through a decline in auction clearance rates, which recently hit a two-year low.
JP Morgan economist Tom Kennedy said the ABS home price data missed market estimates for a 0.5 per cent increase, and attributed this to the weaker Sydney property market.
"Interestingly, both detached and higher density dwelling prices contracted in the September quarter, which further emphasises the moderation in overall activity in recent months," he said.
Hobart posted the strongest price gains in the past 12 months, up 13.8 per cent, while prices in Melbourne rose by 13.2 per cent and Sydney had a 9.4 per cent gain.
Darwin was the weakest city, with prices down 6.3 per cent, while prices in Perth were down 2.4 per cent.
The total value of Australia's 9.95 million residential dwellings now stands at $6.8 trillion, an increase of $14.8 billion in the September quarter.
The mean house price is now $681,100, down $1,200 from three months earlier.
"Our expectation is for national dwelling price inflation to continue moderating in 2018 as macro-prudential measures weigh on lending activity and the record number of dwellings currently under-construction are completed, adding to supply," Mr Kennedy said.
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