HOUSE prices fell in almost half of Sydney's suburbs in the three months to the end of August.
A new report released by property analysts Residex found that 241 of 543 Sydney suburbs - or 44.3 per cent - registered a downturn in capital growth.
Postcodes across the city, including the north shore and other affluent areas, recorded falls.
Even Point Piper, Sydney's most-expensive address, posted a drop in capital growth of 2.29 per cent during the August quarter to a median of $7.87 million.
Overall, Sydney house prices fell by 1.74 per cent to a median of $569,000, despite the drop in official interest rates in August.
However, the unit sector held up relatively well despite negative growth in 229 suburbs.
Apartment prices fell by just 0.75 per cent in the August quarter, but grew by 3.09 per cent in the year to the end of August to a median of $399,500 reflecting a supply shortage which is underpinning prices and pushing up rents.
Head Residex statistician John Edwards said housing affordability was at its lowest.
"Distressed sales are everywhere now," he said. "The decay is making its way into the middle- and upper-income areas as well."
Mr Edwards said stock-market problems had made parts of the north shore particularly susceptible - bad news for homeowners but good news for those in the market to buy a new home.
"You could find some really good sales in middle to upper-income areas such as Turramurra, St Ives, Pymble and Killara," he said.
Killarney Heights, Turramurra, Forestville, East Lindfield and Mount Colah were the worst performers in Sydney, recording drops of more than five per cent in the August quarter.
In some suburbs, this could represent a saving for homebuyers of up to $70,000.
Mr Edwards calculated that it takes 53.5 per cent of the average gross take-home wage to pay off a home loan and 37 per cent of the average gross take-home wage to pay off a unit.
"Australian families are carrying about as much debt as they can handle," Mr Edwards said.
"It's all about interest rates as far as the property market is concerned."
What the Reserve Bank does from now on will have a tremendous impact on confidence in the market and will essentially determine what happens to values.
"The interest-rate drop in August stopped the rot and brought a little confidence back to the market, which helped stabilise it and stopped it going into a tailspin."
Independent property commentator John Wakefield said a softening market coupled with an increase in stock this spring signalled a buyer's market.
"We will see more stock on the market as we move into spring," Mr Wakefield said.
"Regardless of whether the market is good or bad, there are always more properties offered for sale at this time of the year and we shouldn't underestimate the potential that added competition offers buyers. The market is poised for a long period of softness and buyers can take advantage of that."
Many of Sydney's successful suburbs were in the beachfront areas of the north and east and the inner west.
Bronte topped the best-performers list with a jump in capital growth for houses of 22.6 per cent to a median $2.39 million in the year to the end of August, while nearby Clovelly and Tamarama also posted capital growth of more than 20 per cent.
Homebush West and Enfield also made it onto the exclusive list registering growth of more than 19 per cent to record the same median house price of $749,500.
