Australian housing prices have continued to slide, with the market facing its sharpest annual decline in six-and-a-half years.

Key points: National property market fell 3.5pc in the last 12 months, its steepest drop since 2012

National property market fell 3.5pc in the last 12 months, its steepest drop since 2012 Sydney was the weakest market in the past year, down 7.4pc

Sydney was the weakest market in the past year, down 7.4pc Melbourne values had the sharpest quarterly drop, losing 2.1pc

Prices have fallen 3.5 per cent over the last year, on a national basis (to an average of $538,668), the latest figures from property analysts CoreLogic revealed.

This signals "the weakest macro-housing conditions since February 2012 ... a 0.5 per cent fall in dwelling values nationally in [the month of] October," said Tim Lawless, CoreLogic's head of research.

"With such broad-based weakness in housing market conditions, it's clear that tighter credit availability is acting as a drag on housing demand and impacting adversely on the performance of housing values across most areas of the country."

Across the capital cities, property values fell 1.6 per cent to an average of $625,125 in the last quarter.

During the last three months, regional property fell by a slower 0.7 per cent to an average of $375,444.

Priciest markets, biggest falls

Sydney and Melbourne were, once again, the weakest housing markets — their values falling by 7.4 and 4.7 per cent respectively in the last year.

These two cities, being the most expensive in the nation, had the highest concentration of investment buyers.

The median value of a Sydney dwelling was $833,876, a figure which includes both houses and apartments.

The change in Australian housing prices over the last year. ( CoreLogic )

Melbourne's average property value was $665,044, making it the second-most expensive capital city.

There was also a disparity between the "upper" and "lower" quartiles of Sydney and Melbourne markets. The most expensive 25 per cent of properties in those cities saw their values drop by almost 9 per cent.

Meanwhile, the cheapest 25 per cent of Melbourne properties experienced a 2.9 per cent rise in value.

But for Sydney, the value of its cheapest properties fell by about 4.3 per cent.

During the last month, Perth was the weakest market — with values falling 0.8 per cent to an average of $451,148. Sydney and Melbourne declined by a slightly slower 0.7 per cent each in October.

Stronger growth in smaller cities

Hobart was the most affordable market (with values averaging $445,655) over the last year, but that is no longer the case.

Tasmania's capital remains the strongest market by far, rising 9.7 per cent during that period.

Darwin property has become the cheapest capital city to buy a home. Its median price was $433,818 — after values fell 2.9 per cent in the last 12 months.

Brisbane values remained flat in the last month and quarter, at $491,925.

Adelaide performed slightly better, with a tepid 0.2 per cent increase in monthly and quarterly values to $431,554.

Prices to continue falling

"We expect values will continue to drift lower in the remainder of the year, and at least the first half of 2019," Mr Lawless said.

"A big part of this downturn is to do with credit availability and rationing."

Stricter borrowing standards were a result of action taken last year by the Australian Prudential Regulation Authority (APRA).

APRA required the banks to keep interest-only loans to less than 30 per cent of their mortgage portfolio.

"We simply don't see credit becoming more available or starting to free up any time soon," he said.

Capital Economics' Ben Udy agrees with that position — and believes the upcoming price declines will be steep.

"The continued fall in house prices in October is consistent with our view that prices will ultimately drop by at least 12 per cent."

Mr Udy said this would make "the current downturn the longest and deepest in Australia's modern history".

"What's more, this is all before the full effect of the tighter credit conditions linked to the [banking] royal commission has been felt."