The average national house price fell by 4 per cent in the past 12 months, making it one of the worst years for the residential property market, a leading report shows.
The steepest falls were in Brisbane and Melbourne, the RP Data report found, and while prices fell in Perth, the mining boom was expected to bolster prices there next year. But RP Data senior research analyst Cameron Kusher does not expect the two consecutive interest rate cuts in November and December to significantly raise house or unit prices in 2012.
"Obviously the rate cuts will help; I don't think we are going to see values take off again like they did in 2009 after the Reserve Bank started cutting interest rates, but I also don't think that interest rates will go as low," Mr Kusher said.
"I think the rate cuts will result in a little bit more sales activity but I don't think that's necessarily going to result in values starting to decline once again." Brisbane saw the worst results, with house prices shedding 8.8 per cent in 2011 and units losing 2.4 per cent as the housing market cooled from inflated highs.
Mr Kusher says affordability had a large bearing on prices in Brisbane.
"After a long period of outperforming the national market, prices got stretched and people weren't prepared to pay those prices," he said.
And recent figures from Fitch Ratings show mortgage delinquency in tourism destinations such as Airlie Beach and Noosa Heads was on the rise, with both towns among the 20 worst postcodes for delinquencies.
"The tourism areas have been very weak and there's been a slowdown in demand," he said.
"Interstate migration into Queensland has been really slow, so there have been other factors at play, but at the end of the day it comes down to affordability in that market." Melbourne house and unit prices fell by 5.7 per cent, making it the second worst performing city in Australia.
Mr Kusher says prices have been sliding for four years and there is an oversupply of new housing on the Melbourne market.
"That could make any recovery further away because there is ample supply," Mr Kusher said.
"When we look at markets like Sydney, and then to a lesser degree Brisbane and Perth, the housing supply hasn't kept pace, so that's supporting the market somewhat.
"But Melbourne's had very sufficient supply and it's had very strong growth in property prices, and now affordability is really hampering that market." Sydney home prices held their ground, with a 2.3 per cent fall in house prices offset by a 1.1 per cent rise in the value of apartments.
And Darwin home values outperformed the rest of the country, with home values down just 0.9 per cent and units performing slightly better.
Mining boost Perth house values lost 4.4 per cent this year while unit prices fell marginally.
Mr Kusher believes Perth is one of the few cities where property prices may rise in the coming year due to mining investment in the region.
"Back in early 2007 the annual rate of capital growth hit almost 45 per cent on an annual basis and it overcooked itself," Mr Kusher said.
"Prices got a little bit unsustainable and people weren't prepared to pay the prices that people were asking but there might be some improvement in the Perth market over the next year." Mining towns took out seven of the top 10 most expensive places to rent in the country this year, but Mr Kusher cautions that those areas are not necessarily a sure bet for property investors.
While the exclusive Sydney suburb of Vaucluse topped the list, the Pilbara town of Port Hedland took second spot with rents averaging $2,200 a week.
Other Pilbara towns including Bayton, Nickol and Pegs Creek averaged just under $2,000 a week.
"In the Pilbara region, for example, if demand for iron ore suddenly eased significantly those people aren't going to stay in the Pilbara region and aren't going to keep paying those sort of rents," Mr Kusher said.
"So it's a shortage of housing and strong demand for workers in the areas which is really driving up property prices and rental rates, but anyone looking to go into one of those markets needs to be cautious."
