Prospective home buyers could pay $53,000 less for properties after house prices tumbled in one of the fastest ever declines.
The latest Domain report shows house prices in Australian capitals fell 4.9 per cent in the last quarter from a peak in March.
It was the fastest quarterly fall on record.
The median house price is sitting at about $1,022,000, down by $53,000 from the June quarter but still 21.3 per cent higher than the pandemic's low of $999,000.
Apart from Adelaide, house prices in every capital dropped with the Sydney, Melbourne, and Canberra markets seeing the speediest downturns ever recorded.
"We're going through housing market conditions that many buyers and sellers have never experienced in their lifetime," Domain's chief economic researcher Nicola Powell said.
Adelaide bucked the overall trend with house and unit values hitting record highs, but the South Australian market has started to lose steam
"Obviously buyers have reduced their borrowing capacity, but they are also more mindful of mortgage affordability and many are now pricing in further interest rate hikes," Dr Powell told AAP.
Buyers have shifted away from houses, with units outperforming larger dwellings across most capital cities.
In Brisbane and Hobart, unit prices grew while house values dropped, and Perth and Darwin were the only cities where house prices held stronger than units.
"Affordability issues are going to help steer demand away from houses and towards units, and we're already seeing that," Dr Powell said.
House prices might be falling but competition in the rental market remains fierce.
A separate report shows rental availability falling sharply, with the number of rental properties listed on realestate.com.au plummeting 20.5 per cent in the year to September.
Low rental availability is pushing rents higher as landlords can afford to hike rents when tenants have limited choice.
Rents surged 4.3 per cent in the three months to September - the fastest quarterly rate on record.
PropTrack director of economic research Cameron Kusher said investor activity was more subdued than normal.
"With fewer investors purchasing homes to rent out, the limited supply of stock, coupled with strong demand, is leading to heightened increases in advertised rental prices," he said.
Mr Kusher also said some heat was coming out of regional rental markets but big cities were becoming more competitive.
"This is being driven by the return of many people who migrated regionally during the pandemic back to capital cities and the lift in overseas migration," he said.
The Albanese government has faced criticism for failing to boost rent assistance payments for low-income tenants in the budget but has outlined a plan to boost the supply of affordable dwellings in the medium term.
Central to the plan is a commonwealth investment of $350 million starting from 2024 to attract super funds and other institutional investors into the market by covering the gap between market rents and subsidised rents.
Housing Minister Julie Collins said the newly inked housing accord was about bringing all levels of government and industry together to solve the housing crisis.
"This is about looking at what are the barriers to getting more social and affordable homes off the ground," Ms Collins told ABC radio.
She said the commitment to build one million new homes was aspirational despite criticisms that the goal is roughly in line with what the industry normally produces.
Ms Collins said the commitment would help keep new homes construction ticking along despite an expected downturn.
"Some previous government programs have brought forward construction, and construction was expected to drop off dramatically in the second half of next year and in the years following that," she said.
"So this is an opportunity for governments across Australia, state and federal, to step up and to fill that gap and to get more affordable homes into the market."
