The RP Data-Rismark Home Value Index for May showed that dwelling values in the capital cities fell by a combined 1.9 per cent compared to April.
That was the first month-on-month decline since May 2013, although values still rose 10.7 per cent over the year.
Melbourne experienced the biggest monthly decline at 3.6 per cent, followed by Adelaide on 1.8 per cent and Brisbane on 1.7 per cent.
Sydney values fell 1.1 per cent, Perth by 0.8 per cent and Hobart by 0.6 per cent.
Two capitals grew over the month: Darwin by one per cent and Canberra by 0.1 per cent.
Dwelling values in Australia’s capital cities have surged by a combined 13.9 per cent since the growth cycle started in June 2012.
RP Data research director Tim Lawless said Australian growth cycles usually last for two years.
However, he added that it was too early to say if the market was now in decline after 23 months of expansion.
“The month-on-month fall in capital city dwelling values is likely due in part to seasonal phenomenon, but may also be indicative of a broader trend towards cooler housing market conditions,” Mr Lawless said.
“Historically, housing market conditions have softened in April and May as the market rebalances from what is typically a seasonally strong first quarter, and also as a result of cooler climatic conditions during the autumn and winter months.
“Outside of the seasonality, we have been seeing signs the housing market is at or approaching the peak of the growth cycle.”
Mr Lawless also said that market activity would be “more sedate” if consumer confidence continued to remain low.