New homebuilding permits have bucked predictions and fallen for the second month to a new five-and-a-half year low, as credit tightens and Australian house prices continue to slide.

December's seasonally adjusted 8.4 per cent decline in building and renovation approvals continues November's slide, the Australian Bureau of Statistics said on Monday, with approvals now down 22.5 per cent over 12 months.

The market had forecast a 1.5 per cent monthly gain.

House price falls in Sydney and Melbourne appear to be accelerating, says CoreLogic

The data comes just hours before the final report and recommendations from the Financial Services Royal Commission are released, and could factor into the Reserve Bank's thinking on interest rates when it holds its first meeting of the year on Tuesday.

A near 20 per cent drop in the apartment sector during December was the main factor driving total approvals to their lowest levels since June 2013, with the Australian also dollar dipping on the news.

Economists said the ABS data flagged a further weakening of an already deflated housing market.

"Housing weakness in late 2019 was clearly not confined to just turnover and prices with new dwelling approvals sliding sharply into year end," said Westpac economist Matthew Hassan.

"Today's report makes for another sobering review of residential construction forecasts for the next year or two," added NAB's David de Garis.

Housing Industry Association principal economist Tim Reardon blamed the year-ending decline on 'punitive' foreign investment tax rates, as well as a record supply of apartments, and a continued credit squeeze.

"We've long been anticipating the current downturn in new home building, but there is a risk it could develop more quickly and strongly than expected," he said.

"In particular policy makers and lenders will need to respond judiciously to the pending release of the royal commission's recommendations."

The seasonally adjusted estimate for private sector house values fell 2.2 per cent in December, while unit, apartment and townhouse values fell 18.8 per cent.

The value of residential building fell 5.9 per cent for the month, while the value of non-residential building fell 9.8 per cent.

During December, new dwelling approvals increased in three markets including South Australia (+5.6%), the Northern Territory (+1.7%) and Western Australia (+1.1%).

The largest reduction in approvals hit Tasmania (-24.3%) followed by the ACT (-21.3%). The volume of approvals also declined in NSW (-8.6%), Victoria (-8.1%) and Queensland (-5.8%).

Last week CoreLogic said house price falls in Sydney and Melbourne appear to be accelerating and the decline could now be larger than the one that followed the global financial crisis a decade ago.

AMP Capital chief economist Shane Oliver said tight credit, rising supply, falling foreign demand and falling prices had combined to create what he called a "a perfect storm" for Sydney and Melbourne, with Perth and Darwin still falling and most other cities pretty soft.

"We see Sydney and Melbourne home prices falling another 15 per cent or so this year as

part of a total top to bottom fall of 25 per cent, which with little change in average prices across other cities will see national average home prices fall another 5 to 10 per cent this year," Oliver said.

Economists do not expect rates to move from an historic low of 1.5 per cent on Tuesday.