It may come as a surprise to many readers, but Sydney’s weighted average property price fell 1.6% in the December quarter of 2015, compared to the previous quarter.

That follows three years of positive quarterly growth, according to the Australian Bureau of Statistics (ABS). For the 2015 year, Sydney property prices still rose strongly, gaining 13.9%, with Melbourne property prices increasing 9.6% for the year and 1.6% for the quarter.

Darwin was the only other capital city to record negative growth (-1.8%) in the December quarter, with Perth and Darwin both experiencing a fall in property prices for the 2015 year, as the mining boom continues to recede.

ANNUAL PROPERTY PRICE GROWTH

Source: ABS

The quarterly fall in Sydney was mainly attributed to a 2.1% fall in established house prices, with units falling 0.8%. According to the ABS, falls were broad based, with almost all segments of the market showing price falls, across both established houses and units. The official results also confirm results we’ve reported on earlier this year.

More falls in the first three months of the year could be ahead, not just for Sydney, but other capital cities as well, thanks to a number of factors.

Regulatory pressure on the big four banks Australia and New Zealand Banking Group (ASX: ANZ), Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB) and Westpac Banking Corp (ASX: WBC) to limit lending to investors, and foreign buyers deserting the market are more than likely to have contributed to the fall in Sydney prices.

Low rental returns, the government toying with the idea of changes to negative gearing and capital gains tax rules, as well as likely changes to superannuation rules are also likely factors placing downward pressure on house prices.

Despite the fall in weighted average prices, Sydney’s median detached house price still increased during the December quarter to $910,000, from $901,000 in September 2015. Melbourne’s median house price rose to $621,000 from $600,000 the previous quarter.

Foolish takeaway

Auction clearance rates over the past few weeks in Sydney and Melbourne appear to be returning to ‘normal’ levels of above 70%, although there are wide variances in different sectors of the Sydney market – as we discussed yesterday.

Unfortunately, that gives us no real clues to where house prices are going. Sellers may have become more realistic and dropped their prices to meet the market, or we could be in for another year of rising house prices if buyers are jumping back into the market.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.