Melbourne house prices have plunged 8.4 per cent in the past year, new figures show, shaving $76,000 off the median house price.

After a tumultuous year in the property market, the city’s median house price fell to $833,321, according to the latest Domain House Price Report.

“The ongoing falls have resulted in the steepest annual house price drop since our records began in 1993,” Domain senior research analyst Nicola Powell said.

And economists have warned further falls are to come. In a note to investors on Wednesday, AMP Capital chief economist Shane Oliver lowered his outlook and tipped Melbourne house prices to fall by at least another 15 per cent this year, for a peak-to-trough decline of 25 per cent.

Domain data showed parts of Melbourne had already recorded double-digit annual drops with house prices in the inner-east, inner-south and inner regions of Melbourne diving 16.2 per cent, 15.6 per cent and 15.3 per cent respectively.

The current property downturn follows an extended bull run in which the city’s house prices soared 72.8 per cent in five years, peaking at a median of $909,000 in late 2017.

Homes are now transacting at prices recorded in late 2016, after a 2.1 per cent decline over the December quarter.

Melbourne median house prices

Region Dec-18 Sept-18 Dec-17 QoQ YoY Inner $1,105,000 $1,100,000 $1,305,000 0.5% -15.3% Inner East $1,300,000 $1,300,000 $1,551,750 0% -16.2% Inner South $1,167,000 $1,225,000 $1,382,500 -4.7% -15.6% North East $689,000 $700,000 $726,000 -1.6% -5.1% North West $630,000 $611,000 $630,000 3.1% 0% Outer East $750,000 $750,000 $815,000 0% -8% South East $640,000 $640,000 $650,000 0% -1.5% West $600,000 $595,000 $600,000 0.8% 0% Mornington Peninsula $670,000 $655,000 $703,500 2.3% -4.8%

Source: Domain Group House Price Report, December quarter 2018

The report also found the city’s most affordable regions had, so far, largely rebuffed the downturn. The north and north-west were the only regions where house prices did not record an annual drop, while prices in the south-east, a region that spans from Mount Waverley to Koo Wee Rup, slipped 1.5 per cent.

The more expensive end of the market had likely been harder hit by price declines due to tighter lending conditions, said Angie Zigomanis of BIS Oxford Economics.

“In most cases people borrowing that much have income over and above their salaries, be that bonuses or they own a business or they are getting commissions,” Mr Zigomanis said. “They are the income components that there is probably the most scrutiny on now.”

First-home buyers could also be supporting the cheaper end of the housing market, he added.

Softening conditions across the city have been welcomed by hopeful buyers like 29-year-old marketing teacher Rubab Ashraf.

Mr Ashraf, who is currently renting in Craigieburn, has been scouting the outer north and the western suburbs for a block of land to build a large family home, where he will live with his wife, as well as his brother, sister-in-law and their two children.

“I’ve been doing my homework for one and a half years,” Mr Ashraf said. “I can see that prices haven’t gone down; they have been static.”

With the heat taken out of the market, Mr Ashraf said he felt more relaxed and empowered about the buying process. “I’m not in a rush,” he said. “Now I’m looking into more suburbs.”

While buyers have gained an upper hand, property observers say the strict lending environment is causing sales to fall over at the 11th hour.

Compton Green, a real estate agency in the city’s inner west, have now extended their sale campaigns to give prospective buyers more time to secure finance.

“Late last year, we had many clients on the day before auction say they hadn’t gotten their approval and they couldn’t bid on the day,” said director Adrian Butera. “So now we’re talking about five or six-week campaigns.”

Melbourne median unit prices

Region Dec-18 Sept-18 Dec-17 QoQ YoY Inner $530,000 $530,000 $535,000 0% -0.9% Inner East $608,088 $585,500 $615,000 3.9% -1.1% Inner South $600,000 $572,000 $620,500 4.9% -3.3% North East $475,000 $445,000 $475,150 6.7% 0% North West $460,000 $456,000 $430,000 0.9% 7% Outer East $542,000 $527,500 $551,000 2.7% -1.6% South East $431,250 $420,000 $435,250 2.7 -0.9% West $411,250 $405,000 $415,000 1.5% -0.9% Mornington Peninsula $437,500 $447,500 $450,000 -2.2% -2.8%

Source: Domain Group House Price Report, December quarter 2018

Meanwhile, the apartment market is holding firmer than houses. Unit prices fell 1.8 per cent over the quarter to a median price of $479,306.

As the regional median unit figures were more affected by seasonality, Dr Powell said they could “paint a rosier picture” than the citywide median.

Mr Zigomanis said apartment prices had likely fallen less than houses because houses had experienced a much bigger upturn in recent years.

Weak off-the-plan sales could halt the construction of new developments, Mr Zigomanis said, adding that prospective buyers will soon be able to choose from a large supply of apartments due to be completed and come onto the market.

“If you buy off the plan, there’s a chance prices might fall further once it’s completed,” he said.