Sydney house prices have dropped by 10 per cent this year, with the wealthiest areas suffering the biggest hits, the latest data shows.
House prices in the Harbour City fell by 10 per cent since the peak in February, according to the Core Logic daily home value index.
It is the largest capital city fall, followed by a 6.5 per cent fall from the peak in Melbourne.
The data showed the median value in Sydney fell from $1,158,753 on February 13 this year to $1,042,276 on October 23.
Nicola Powell, chief of research and economics at real estate website Domain, said rising interest rates and inflation have had a severe impact on consumer sentiment in Australia.
The Reserve Bank has hiked interest rates six times this year, with the cash rate rising from 0.10 per cent in early May to 2.6 per cent in October.
Dr Powell said the highest price markets of Sydney and Melbourne had experienced the greatest falls.
"With that high level of household debt that a typical Sydney buyer has, because that property price is so high, and it's well over a million dollars, it heightens the vulnerability of households to rising interest rates," she said.
House price falls were greatest in local government areas (LGA) with the highest house prices, with the northern beaches recording a 16 per cent fall from January to September.
The Fairfield LGA in Western Sydney recorded just a 0.6 per cent fall, the lowest in Greater Sydney.
Core Logic head of research Eliza Owen said price falls were greatest in the high end of the market.
"The decline in Sydney home values has become more geographically broad based, with even the more resilient parts of the market in decline, but these lower-priced markets of Sydney are unlikely to see the same depth of decline as what we are seeing in the high end of the market," she said.
The drop in Sydney house prices followed a 27 per cent, $250,000, post-COVID surge after prices bottomed out in October 2020.
However, Sydney house prices are still 12 per cent higher than they were at the start of the COVID-19 pandemic in March 2020.
Half of the decline happened in the last three months, when Sydney house values fell 5.5 per cent.
Dr Powell said Sydney house prices were expected to fall further, with the Reserve Bank predicting interest rates to reach four per cent by mid-2023.
"That in itself damages borrowing capacity. And I think, you know, people ultimately are going to market with less to spend, and I think that is going to continue to weigh on price," she said.
