Housing prices have slipped for many Australian capital cities in the past quarter, as tighter lending conditions and falling investment levels continue to affect the market.

Key points: Hobart property prices rose the most in the month (+0.3pc), quarter (+2.3pc) and year (+12.7pc).

Hobart property prices rose the most in the month (+0.3pc), quarter (+2.3pc) and year (+12.7pc). Sydney (-0.9pc) and Melbourne (-1.4pc) fell the most in the last quarter

Sydney (-0.9pc) and Melbourne (-1.4pc) fell the most in the last quarter Prices in Geelong (+11pc) and Launceston (+7.1pc) and other regional markets lifted strongly in the last year.

Home prices fell 0.2 per cent in June on a national basis, which marks the ninth consecutive month-on-month drop, according to the latest report from property industry analysts CoreLogic.

National property prices peaked in September last year and have since fallen 1.3 per cent to a median of $556,384.

Despite that, national property prices are still 32.4 per cent higher compared to five years ago.

"This highlights the wealth creation that many home owners have experienced over the recent growth phase, but also the fact that recent home buyers could be facing negative equity," said CoreLogic's head of research Tim Lawless.

Whether a property's value rose or fell depended on whether it was in the "most expensive" or "least expensive" end of the capital city market.

Prices at the high-end fell 3.6 per cent, but prices rose 1.4 per cent at the lower-end.

Those differences were even more pronounced in Sydney and Melbourne — with their priciest homes falling 7.3 per cent and the cheapest rising 2.5 per cent.

"A surge in first home buyer activity has helped support demand across the more affordable price points in these cities," Mr Lawless said.

Graph showing annual change in Australian dwelling values ( Corelogic )

Best and worst performers

The weakest capital cities were Sydney (-0.9pc) and Melbourne (-1.4pc) in the last three months, bringing their median (middle) prices down to $870,554 and $716,774 respectively.

Over the last 12 months Sydney prices fell 4.5 per cent, while Melbourne prices rose just 1 per cent, because those two cities had the highest concentration of investment activity, which has been winding back.

Although Hobart's growth has slowed down in the last quarter, it remains the capital city which experienced the largest price increase — jumping 2.3 per cent to an average of $436,899.

Tasmanian's capital saw its prices surge 18.3 per cent on a yearly basis, eclipsing all other cities by far.

The next best performers over the past 12 months were Canberra (+6.9pc), Adelaide (+5.3pc) and Brisbane (+5.1pc).

Along with Sydney, Perth and Darwin were the weakest annual performers, down 2.1 and 7.7 per cent respectively.

INFOGRAPHIC: Graph shows change in dwelling values in Australia's capital cities. ( CoreLogic )

Regional growth beating capital cities

However, the fall in capital city prices was partially offset by a 0.6 per cent rise in combined regional markets.

The best performing regional markets over the past year were Geelong (+11pc), Launceston (+7.1pc) and Southeast Tasmania (+6.8pc).

Victoria's Mornington Peninsula was another notable strong performer, with its median value lifting 7.3 per cent to $679,000 over the 2017-18 financial year.

The strong performance in those areas was generally due to their relative affordability and an increase in first home buyer activity from July 2017 when stamp duty concessions became available.

"Markets such as Geelong, the Capital Region and Ballarat, have each benefitted from a spill-over of demand emanating from the more expensive and often more congested metropolitan areas of Melbourne and Canberra," Mr Lawless said.

"Areas adjacent to Sydney have also seen market conditions benefit from this ripple of demand, however conditions are now generally easing."

Prices expected to drop

CoreLogic expects official interest rates to remain at a record low 1.5 per cent until late-2019 at the very least.

But many economists predict the Reserve Bank will not announce an increase to rates until 2020, or for even longer.

Despite that, smaller banks like Bank of Queensland, AMP Bank, Auswide Bank, IMB Bank and Suncorp have recently imposed "out of cycle" rate hikes due to higher funding costs.

The big four banks are under mounting pressure to follow suit and increase mortgage rates.

"Smaller banks and non-banks have more exposure to international funding costs, which has seen some of these lenders start to lift their mortgage rates," Mr Lawless said.

"Should widespread increases to the cost of debt occur, we would expect this could place additional downward pressure on housing market conditions.

"A weaker housing sector would likely show a flow-on effect to economic conditions, creating some drag on consumer spending and dwelling construction and creating challenges for those industries that are at least partially reliant on housing turnover."