Prices went up in six capitals over the December quarter, ranging from 0.5% in Perth up to 2.8% in Canberra.
But they went backwards by 1.6% in the NSW capital and by 1.8% in Darwin, dragging down the weighted average of all eight cities to a quarterly increase of just 0.2% to December 31.
It was the first quarter in which Sydney recorded a price drop since March 2012.
Despite the fall, however, Sydney was still by far the strongest-performing capital in 2015, with residential property prices up almost 14% over the year. Prices in the next best performing capital, Melbourne, were up 9.6%, while Canberra also saw healthy value growth of 6%.
Darwin and Perth were the only capitals to go backwards in 2015, down 3.2% and 2.9% over the year respectively.
Annual price growth across the combined weighted capitals was 8.7%.
The figures point to what CBA senior economist Michael Workman identified as the "quite divergent price cycles of the eight capital cities, depending on local economic issues, like employment and under or over supply of dwellings".
He also noted that "much higher new supply, lower population growth and slightly higher mortgage rates are ingredients for weaker price growth" and predicted the "house and apartment price cycle to continue moderating over 2016".
The total value of Australia's dwelling stock sits at around $5.89 trillion according to ABS numbers, which Workman highlighted is roughly 360% of Australia's total GDP. Mortgage debt accounted for more than a quarter of the total value of the stock.
He also argued the country's rising dollar is likely to make local residential investment slightly less attractive to foreign investors.
ABS reports the mean price of residential dwellings rose $800 to $612,100 over the December quarter, and that the number of residential dwellings rose by 38,700 to hit 9,615,800.
On average there were 2.488 people living per home, down from 2.491 in the September quarter.