Australian dwelling values have recorded their first month-on-month fall since May 2013, dropping 1.9 per cent in May, according to RP Data-Rismark figures.
CommSec chief economist Craig James said the result was the biggest fall in more than five years.
"Home prices couldn’t lift forever -- at some point there had to be a correction and it seems the federal budget caused people to pause and take stock," Mr James said.
"But the Reserve Bank will take the latest data on home prices in its stride. Auction clearance rates were still healthy over the weekend, so the drop in home prices may just be the pause that refreshes."
Most capital cities registered a decline for the month, with Melbourne performing worst with a 3.6 per cent reduction in values, while Sydney gave up 1.1 per cent and Brisbane lost 1.7 per cent.
For the past three months, however, capital city dwelling valuations are up 0.7 per cent, the lowest rate of appreciation since the June quarter 2013.
The best performing for the quarter was Darwin, with a 5.5 per cent increase, while Melbourne lost 1.9 per cent.
Australia’s most expensive city is Sydney with a median house price of $678,500, while Hobart is the most affordable, with a median dwelling price of $345,000.
RP Data research director Tim Lawless said this month’s poor performance can be attributed to both “seasonality and more moderate housing market conditions”.