All major capitals have experienced a softening of house values over the June quarter, and property values across the nation are expected to dip by 10% over the next 12 months, according to new research.

Michael McNamara, general manager of Australian Property Monitors, said the firm's June quarter statistics revealed that Sydney house values dropped by 2.1%, dragging the annual growth rate to -8.4%.

Perth houses also slipped 2.8% over the quarter, while Melbourne's auction market reached it poorest state since 2004, and state-wide house values dropped by 1%.

"The June quarter housing data is the weakest we've observed since 2004.
This quarter we recorded widespread falls across Australia's major capitals, and we expect this trend to continue," McNamara said.

"It's likely these results are the canary down the coal mine, and that rapidly rising mortgage rates and a looming economic slowdown will usher in a sustained period of property market weakness."

In Brisbane, the weakness for houses and units is "now pronounced", McNamara said, with house values easing by 1.3% and unit values dropping by 3%.

The Adelaide market has also become extremely sluggish, with property values in a holding pattern. A glut of unsold properties in Canberra have provided choice and bargaining power for buyers, which is "putting downward pressure on prices".

"Strong migration patterns and rising gross rental yields aren't enough to attract either first homebuyers, who are put off by rising mortgage costs, or investors, who are spoilt for choice given that many asset classes are providing excellent cash returns," McNamara said.

"The growing number of unsold properties sitting on the market is exacerbating the situation - there are currently more than 25,000 extra properties on the market nationally when compared to this time last year. More vendors are competing for the attention of fewer buyers, which results in pressure to discount."

Given that inflationary pressures haven't eased and the risk of cash rate movement is still on the cards, McNamara said he expects that all major capitals will experience larger price drops as the year progresses.

"We expect a further 10% dip in house and unit values across most major capitals over the next 12 months," he said.