Australian property prices have fallen at an even faster rate in the new year, dropping an average of 1 per cent last month nationally.

Key points: Sydney (-9.7pc) and Melbourne (-8.3pc) property markets fell the most in the last year

Sydney (-9.7pc) and Melbourne (-8.3pc) property markets fell the most in the last year Hobart prices (+7.4pc) had the biggest price rise in 2018

Hobart prices (+7.4pc) had the biggest price rise in 2018 Darwin's median price was lowest ($412,940), while Sydney was the priciest ($795,509)

Since peaking in October 2017, the nation's property prices have fallen 6.1 per cent, with the median price now sitting at $528,553, according to property analyst CoreLogic's most recent figures.

The current downturn is now worse than the peak-to-trough decline of the global financial crisis (GFC) a decade ago — during which national prices fell about 5 per cent.

UBS economist George Tharenou has gone as far as calling it the "equal worst in 36 years [since] around the 1982/3 recession".

Stricter lending standards and "a further dent to confidence" are expected ahead of the federal election and banking royal commission's final report — to be released publicly next Monday.

"This is the new normal," Tim Lawless, CoreLogic's head of research, told ABC News.

"For prospective borrowers, it's become much harder to obtain finance if they're on high debt-to-income ratios, or have a track record of large expenses."

There are about eight reasons why the housing market is in a downward spiral, according to AMP Capital's chief economist Shane Oliver.

"The decline in property prices is continuing to be driven by a perfect storm combination of tighter lending conditions, poor affordability, surging unit supply, reduced foreign demand, the switch from interest-only to principle and interest mortgages for a significant number of borrowers, fears that negative gearing and capital gains tax concessions will be made less favourable if there is a change of government, falling price growth expectations and FOMO (fear of missing out) risking turning into FONGO (fear of not getting out) for investors."

Falls in almost every capital city

Sydney and Melbourne experienced the weakest conditions once again, with values falling by at least 1 per cent each month since November 2018.

The latest results take Sydney's median home value back to where it was two-and-a-half years ago (July 2016), and Melbourne dwellings have reverted to their January 2017 values.

Hobart remains the best performing market (from a seller's perspective) with prices rising 7.4 per cent in the last year to a median of $457,785.

But Tasmania's capital is showing signs of slowing down, recording a 0.2 per cent fall in values in January.

Every capital city, except for Canberra, saw a fall in their median values last month.

There was a silver lining (for landlords) as every capital city — except for Hobart and Darwin — saw a lift in rental yields over the last 12 months as prices fell but rents remained relatively steady.

Taking longer to sell ... with bigger discounts

CoreLogic observed that, across capital cities, vendors are now having to offer bigger discounts to sell their properties.

The median discount was 6.1 per cent in the last three months — a significant jump from the 4.7 per cent recorded in the quarter ended January 2018.

Furthermore, buyers are not in a rush as the time it took to sell a property had increased from 37 days (a year ago) to 44 days.

The most expensive quartile of the housing market experienced the biggest fall in values.

In particular, CoreLogic said the most expensive 25 per cent of housing stock in the Melbourne and Sydney markets dropped 12.4 and 10.8 per cent in value in the last year.

"The lower valuation brackets have benefitted from higher demand from first home buyers as well as tighter lending conditions for borrowers with higher debt-to-income ratios," Mr Lawless said.

He noted this was "likely supporting a shift of demand towards lower price points".

"Although the more affordable valuation brackets across Sydney and Melbourne have seen some resilience to falls early in the decline phase, it's clear that all segments of the market in Australia's two largest cities are losing value."

How much worse could it get for owners?

"The peak-to-trough decline in home prices is still 'only' 6 per cent'," Mr Tharenou said.

"We have long expected a 10 per cent drop, or more if regulators don't ease [restrictions on lending].

"But now that APRA [the Australian Prudential Regulation Authority] has effectively ruled out further macroprudential easing, the risk of an even larger fall has increased."

Capital Economics' Ben Udy's outlook was equally pessimistic, as he expects the nation's housing market to drop 15 per cent (from peak to trough).

If that were to happen, it may prompt the Reserve Bank to cut interest rates — despite its desire to hike rates like its US counterpart, the Federal Reserve, over the past year.

Australia's official cash rate is currently at a record low 1.5 per cent — and has remained at that level for well over two years.

If the RBA were to announce another rate cut, borrowing costs would fall to an even lower "record" low.

"We believe that the downturn will result in weaker dwelling investment and slower consumer spending, which would drive a slowdown in GDP growth from 2.9 per cent in 2018 to 2 per cent this year," Mr Udy said.

"To combat that economic slowdown we think the RBA may need to cut rates before the end of 2019."

AMP's Shane Oliver is also expecting the RBA to cut interest rates.

"Ongoing home price falls in Sydney and Melbourne will depress consumer spending as the wealth effect goes in reverse and so homeowners will be less inclined to allow their savings rate to decline further," he said.

"It's also a negative for banks and is consistent with our view that the RBA will cut the cash rate to 1 per cent by year end."