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The expected end of interest rate hikes could soon see the property market rebound.
The residential property market has been cooling off from lofty heights reached in the late stages of the pandemic, falling 2.3 per cent in the year to November.
Capital city prices have led the drop off, falling 5.2 per cent in 12 months, whereas regional dwelling values actually increased 3.3 per cent.
The slowdown has been triggered by one of the fastest interest rate tightening cycles in history.
But with interest rates either at or close to their finale, CoreLogic's Eliza Owen said housing value declines could find a floor in the new year.
Ms Owens said a slowdown in the pace of decline suggested the peak of dwelling value falls was over, although it's possible price falls would accelerate again, especially if the Reserve Bank continued hiking rates in the new year.
"As we move into 2023, there continues to be a mix of headwinds and tailwinds for housing market performance," she said.
On the subject of tailwinds, Ms Owen said the looming fixed-rate mortgage cliff could trigger more sales as homeowners were bumped from a fixed rate of about two per cent to a variable rate of more like five or six per cent.
For lower-income households less capable of absorbing this kind of mortgage shock, this could motivate more sales and possibly arrears.
Ms Owen said mortgage holders were moving into uncharted territory as the cash rate closed in on the financial regulator's three per cent serviceability buffers introduced to make sure borrowers could withstand higher interest rates.
"But unemployment levels remain at historic lows, which plays a role in serviceability, helping to keep a lid on mortgage arrears," she said.
High rents and falling prices are also likely to attract more investors and first-home buyers into the market, which will help support a recovery in late 2023.
Looking back at the year that was, Ms Owen said it was interesting to see Adelaide and Perth showing resilience to the 2022 downturn.
The Adelaide market has dipped 0.9 per cent from the July peak but dwelling values across the city are still 13.4 per cent higher than this time last year.
For contrast, home prices fell 10.6 per cent in Sydney over the 12 months.
Adelaide's relative affordability well as low stock availability helped insulate the region from rising interest rates, the report said.