Wednesday's release shows dwelling values went down in four of the eight capital cities over the calendar year, led by Sydney (-8.9 per cent) and Melbourne (-7.0 per cent), while values were also lower across Perth (-4.7 per cent) and Darwin (-1.5 per cent).
Adelaide, Brisbane and Canberra saw a slight increase, but conditions weren't as strong as 2017, with every capital city recording a weaker pace of growth or an accelerated decline over the year.
"Although Australia's two largest cities are the primary drivers for the weaker national reading, most regions around the country have reacted to tighter credit conditions by recording weaker housing market results relative to 2017," said CoreLogic head of research Tim Lawless.
"Such a soft result amongst the best performing areas highlights that housing market weakness is broad-based and not just confined to Sydney and Melbourne."
Tasmania bucks the trend
The two exceptions were regional Tasmania, where the pace of capital gains was higher, resulting in a nation-leading 9.9 per cent gain in values, and Darwin, where the annual rate of decline improved from -8.9 per cent in 2017 to -1.5 per cent in 2018.
The strongest capital city sub-regions were confined to Hobart, Canberra, Brisbane and Adelaide where housing prices are generally more affordable relative to household incomes, although housing affordability has rapidly deteriorated across Hobart.
Outside of Hobart, where dwelling values were 8.7 per cent higher over the year, even the best performing regions returned a relatively mild annual growth rate.
Seven of the top ten sub-regions returned an annual gain of less than 3 per cent.
The weakest capital city sub-regions were primarily located across the regions of Sydney, which comprised eight of the top ten weakest capital city markets in 2018.
Despite Sydney's dominance of the weakest performing areas, Melbourne's Inner East, which includes some of the city's most expensive properties, topped the list for the largest annual decline in dwelling values.
Dwelling values were down 13.4 per cent across the Inner East, followed closely by Sydney's Ryde where values were 13.3 per cent lower
The strongest regional performers for 2018 were in Tasmania and Victoria, with sub-regions in these states comprising seven of the top ten best performing regional markets - including Launceston and Tasmania's North East, Latrobe and Gippsland, South East Tasmania, Ballarat and Geelong in the top five.
The weakest regional areas comprise a broader range of locations from agricultural regions where drought conditions and low demand are weighing down the market, through to previously strong markets adjacent to Sydney such as Newcastle and Lake Macquarie, Illawarra, the Southern Highlands and Shoalhaven.
Mr Lawless said access to finance is likely to remain the most significant barrier to an improvement in housing market conditions in 2019.
"Lenders are understandably risk averse against a backdrop of falling dwelling values, high household debt, rising supply and heightened regulatory focus following the banking royal commission," he said.
A burst housing bubble remains the greatest risk to the nation's $1.3 trillion economy, according to the Organisation for Economic Co-operation and Development, with a hard landing possibly for the already-stagnant property market.
House prices and auction activity have fallen gradually since late 2017, with Reserve Bank Assistant Governor Christopher Kent blaming "unnecessary" credit tightening in December for further threatening the market.
Last month the Australian Prudential Regulation Authority announced it was removing a cap on interest-only loans for residential property, on the grounds that the measure had reached its objective of curbing higher-risk lending practices.
APRA said the cap had "led to a marked reduction in the proportion of new interest-only lending, which is now significantly below the 30 per cent threshold".
Mr Lawless said he expects housing market conditions to continue to slide over the coming year.
"With a federal election likely to be held sometime in May, we may see a further negative impact on confidence, especially amongst investors who will be impacted by changes to taxation policy should there be a change of government," he said.
"On a positive note, interest rates are set to remain close to historic lows and migration is likely to remain high (albeit lower than last year) which will help to keep a floor under housing demand."