The national median dwelling value fell another 1.2 per cent in October, extending the home price slump to 6.7 per cent since the March peak, data provider Cotality reported on Monday.
Elevated affordability and serviceability pressures were already affecting price growth at the start of the year.
But higher interest rates and Labor's budget tax changes weighed further on demand, putting Australia on track for the deepest downturn in 40 years.
Curbs to negative gearing and the capital gains tax discount had made housing more affordable for young Australians trying to get into the housing market, Social Services Minister Tanya Plibersek said.Â
"People had given up on the dream of home ownership," she told the Seven Network's Sunrise program.
"Most Australians were worried about their kids or their grandkids.
"The fact that the growth in house prices has moderated, I think that means that housing will be affordable for my kids and my grandkids one day."
While the government has consistently stood by its tax changes, it has been careful not to claim all the credit for the downturn.
Housing Minister Clare O'Neil and Treasurer Jim Chalmers have pointed to the Reserve Bank's four rate rises since February as a major factor.
Polling by Westpac shows the tightrope Labor is attempting to walk.
While 68 per cent of Australians believed falling house prices would be good for the nation, including 62 per cent of home owners, three-quarters of mortgage holders were concerned about property values falling further.
The tax changes had had a "wrecking ball effect" on the housing market, Opposition housing spokesman Andrew Bragg said.
"We've seen higher rents, we've seen fewer houses built and we have fewer loans to owner-occupiers," he said.
But Australian Bureau of Statistics data showed more homes are being built than at any time on record.
Dwelling approvals also climbed in September, according to the ABS.
Trend approvals are the highest in five years, with approvals for apartments and townhouses at an eight-year high.
And in Australia's most expensive capital, dwelling prices are the cheapest they have been in five years, according to Cotality.
The median Sydney property value fell 1.6 per cent in October to $1,178,959, more than 10 per cent below the February peak.
Prices in Perth and Brisbane were falling even faster.
"We saw such an enormous accumulation of value in those mid-sized capitals over the past five years," Cotality head of research Gerard Burg said.
"It means when you see these sizeable declines in those markets, they have a lot they can give up, with a lot of home owners not feeling too much direct pain."
Brisbane's median value plunged two per cent in October but was still 46 per cent more expensive than five years earlier.
In Perth, where prices were growing at an annual rate of about 25 per cent a few months ago, values fell 1.7 per cent.
Melbourne fell a more modest 0.8 per cent.
Still, Melbourne-based Ray White real estate agent Dexter Prack says the declines are the biggest he has witnessed in his 28-year career.
"Some properties, they've gone back to 2017, 2018 prices, which is scary," he told AAP.
Nationally, the median dwelling value has shed $63,400 since March.
But higher interest rates have eroded the median household's borrowing capacity by about $71,000 since February, Mr Burg said.
With the Reserve Bank tipped to hike rates again on Tuesday and unlikely to cut until late 2027, Mr Burg expects values to keep falling.
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