In the first quarter of 2011, Australian house prices declined by the most since 2008.

As borrowing costs increased, the weighted average of prices for existing houses in eight major cities dropped by 1.7% from the previous quarter, the largest decline since Q3 2008. In Queensland's capital, Brisbane, there was also a significant drop in transactions as a series of floods hit the state from December 2010 to January 2011.

After increasing rates several times from October 2009 to November 2010, the Reserve Bank of Australia kept rates at 4.75% in the last four meetings as Queensland's economy struggled to recover from flood and cyclone damage.  The floods brought the state's property market "to a standstill," says economist Ben Jarman of JP Morgan Chase & Co.

Melbourne and Brisbane experienced the biggest price drops (2.5% from the previous quarter), and Sydney house prices fell by 1.8%.

Source: Bloomberg