Home values in Australia's capital cities fell for the ninth consecutive month in June and are down by a combined 1.6% annually, CoreLogic data shows, with values in Sydney falling 4.5% over the past 12-month period.
Hobart continues to show the strongest capital gain trend, with home values up 2.3% in the past three months and 12.7% annually.
CommBank economists are forecasting home values to continue to drift lower, with prices expected to fall by around 2.5% this year and by a similar size drop next year.
"The declines will be concentrated in Sydney and Melbourne," CommBank said. Sydney prices could fall around 10%, they said in a note, and by about 7.5% in Melbourne, taking prices back to levels last seen in 2016, the economics team forecast.
CoreLogic's research director Tim Lawless said in a statement that "despite recent and consistent monthly falls, national dwelling values remain 32.4% higher than five years ago."
"Tighter finance conditions and less investment activity have been the primary drivers of weaker housing market conditions and we don't see either of these factors relaxing over the second half of 2018," Lawless said.
The CoreLogic data showed declines in value had been greater across the most expensive quarter of the market, down 3.6% annually compared with a 1.4% fall in the least expensive end of the market.
Home values in combined regional areas are up 2.2% annually, with Geelong in Victoria leading the gains, up 11% in the past 12 months.
CommBank economists agreed the declines needed to be put into context with the "very strong gains experienced since early 2012".
However, they added that "a cooling housing market adds to the case for interest rates to stay on hold until we see wages growth turn around".