The rate of house price declines slowed in February, but not by enough to dissuade economists that Reserve Bank rate cuts are just around the corner.
The national median home price fell 0.7 per cent in February to $524,478, according to data released Friday by CoreLogic, a level last seen in September 2016.
That's down 2.7 per cent for the quarter and 6.3 per cent for the year, although the monthly decline eased relative to those recorded during the traditionally slow December and January months.
But despite last month's bounce for Sydney and Melbourne's auction clearance rates, and a slowing in momentum in monthly price declines, AMP Capital chief economist Shane Oliver said he was doubtful it meant the property market was stabilising just yet.
"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," Dr Oliver said.
"It’s also a negative for banks and is consistent with our view that the RBA will cut the cash rate to one per cent by year end, starting around August."
He said the pricing weakness is now at levels lower than when then RBA started cutting rates in 2008 and 2011.
Dr Oliver anticipates an overall 25 per cent top-to-bottom fall in Sydney and Melbourne, with prices bottoming out in 2020.
CoreLogic head of research Tim Lawless cited tightening credit as having a broad dampening effect on buying activity in regions that previously experienced rising prices at a sustainable pace.
Hobart was the only capital city to record a rise in February and in the quarter, lifting 1.1 per cent over the past three months to $457,186.
It's also the annual leader with a 7.2 per cent rise.
Housing prices in Sydney led the decline annually, down 10.4 per cent to an average of $789,339 - for its first double digit annual decline since the early 1980's.
Melbourne closely followed at 9.1 per cent lower to $629,457, with Mr Lawless saying double digits are also on the horizon for the Victorian capital.
CoreLogic blamed the substantial Sydney and Melbourne declines on the long-running reduction in investment lending.
Demand for rental properties across every capital city apart from Darwin prompted weekly rents to edge higher over February.
The changing state of Australia's housing market may be occupying the minds of many property owners, but cooling prices in big cities are not worrying Treasury.
House prices fell by 4.8 per cent nationally in 2018, according to CoreLogic data, and are expected to continue declining this year.
But Treasury secretary Philip Gaetjens says as long as prices don't drop steeply, his department isn't stressed.
"As long as it’s not a sharp correction, I don’t think it’s a problem," he told a Senate estimates hearing on Wednesday.
“I don’t think from a policy point of view, there’s much concern."
Mr Gaetjens said all housing markets go through cycles, with prices in Sydney and Melbourne climbing in recent years amid high demand.
That caused some issues for people wanting to buy their first property and regulators monitoring the quality of credit lenders were offering.
The Treasury boss said recent price declines reflect efforts by regulators such as the Australian Prudential Regulation Authority to improve the quality of credit offered.
“We’re looking at results that I think are consistent with the policy objectives of those regulators.”