ALTHOUGH the average Sydney house price slipped only slightly at the end of last year, there were big falls in the eastern suburbs and on the lower North Shore.
Eastern suburbs house prices fell 14 per cent to an $887,000 median during the December quarter. Lower North Shore house prices fell 13 per cent to a $1.03 million median, the latest figures from Australian Property Monitors show.
Overall, Sydney house prices fell just 0.7 per cent in the December quarter. But the year's 4.2 per cent price deterioration shaved $23,000 off the city's median house, which now stands at $536,000. The inner west recorded a 2.7 per cent drop to $700,000 in house prices.
Small increases in house prices were recorded during the December quarter in the south, south-west, upper North Shore and Canterbury-Bankstown.
Sydney's median house price hit $568,500 in early 2004, with the subsequent $32,500 decline representing a 5.7 per cent drop on the boom-time peak.
But Sydney's price pain has been mild compared with Perth and Canberra. Perth, which had previously been challenging for the priciest mantle, recorded a 7.9 per cent drop during 2008 to a $475,000 median. Canberra house prices fell 6.7 per cent during 2008 to a $458,000 median.
Sydney units remained more resilient than houses, falling 3.8 per cent during 2008 to a $362,300 median after no price movement during the December quarter.
"While the first home buyers share of the mortgage market increased from November, these latest figures show that the Government's first home buyers boost scheme has done little, thus far, to stem falling property prices," said Liam O'Hara, an economist at Australian Property Monitors.
He said property prices were unlikely to fall as precipitously this year, such as the falls in the United States and Britain last year, but market values would "continue to slide modestly" over the next two quarters.
The market for units was weakest on the northern beaches during the December quarter. They fell 3.7 per cent to $457,000.
"There is now a genuine belief, among even the most optimistic economists, that the current fiscal and monetary policy stimulus packages are not enough," Mr O'Hara said.
Some economists predict cash rates could drop to 2.75 per cent by April. The Reserve Bank is expected to cut the cash rate of 4.25 per cent to 3.25 per cent when it meets on Tuesday as markets absorb the bleak forecast for global growth from the International Monetary Fund.
Australia could soon have the lowest interest rates since the early 1960s, when Sydney's median house price was $8500.
While rate cuts will alleviate mortgage stress, concerns about higher unemployment have prompted Fujitsu Consulting to forecast 929,000 borrowers under mortgage stress by July.
Queensland's Sunshine Coast was listed as the world's least affordable property market, ahead of Sydney, London and New York, in this week's 2009 Demographia International Housing Affordability Study. The study ranked Sydney as the fifth most expensive city given house prices are running at 8.3 times median income.