PHOTO: Tighter lending conditions, cooling investor demand and the Royal Commissions contributed to the decline in new mortgages in 2018. Photo: James Alcock.

The number of new home loans approved last year plunged almost 20 per cent, signalling further price falls and cheaper houses, according to economists.

Tighter lending conditions, cooling investor demand and the then-impending banking royal commission final report were the major factors for the decline.

The number of mortgages taken out across the country dropped by 19.8 per cent in the year ended December 2018, Australian Bureau of Statistics data released on Tuesday showed.

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