Property values in Newcastle and Lake Macquarie declined for a third consecutive month in July as the downturn gathers momentum.
According to Cotality's Home Value Index (HVI), the median dwelling value in the region fell 0.7 per cent last month, pushing the quarterly decline to 1.6 per cent.
The median dwelling value sits at $1,030,227.
The monthly decline was spread across both housing sectors: house values fell 0.7 per cent to a median of $1,073,287, while unit values slipped 0.9 per cent to $811,443.
The region's downturn follows a peak in April, after which values turned negative in May with a 0.3 per cent dip, followed by a 0.5 per cent decline in June (revised figures supplied by Cotality).
Cotality head of research Gerard Burg said a combination of economic pressures is weighing on buyer demand.
"There has been this buildup of pressures on the demand side, so even before the rates went up, there was a lot of affordability pressures in place that was limiting the number of buyers who are out there in the market," Mr Burg said.
"The rates have had a very big impact, but there has also been this flow-on of the high oil prices globally.
"That that has also hit consumer confidence quite significantly and so it's at very pessimistic levels and then finally, we've had this change in the budget around investors, so all of these factors have built up over time and we're now in this position where it is pushing the market lower."
Mr Burg said that while sellers have arguably been slower to adjust to changing market conditions, the shift between buyer and seller expectations is becoming increasingly apparent.
"It's representative of what's happening and certainly there has been this mismatch between what sellers have been expecting and what buyers are willing and able to do," he said.
"We are seeing weaker performance in auctions and for people who are selling via private treaty, we've seen time on market is starting to go up.
"That speaks to the idea that there are fewer buyers in the market and there is a lot of stock available.
"Those who are still in the market to buy have more time, they're able to negotiate more and are able to make a more considered decision compared to late last year."
The volume of homes on the market has increased across the region.
Cotality data shows 1861 properties were listed for sale across Newcastle and Lake Macquarie at the end of July, compared with 1371 in January this year.
"When we look at the region as a whole, we have started to see the volume of total listings is moving up," Mr Burg said.
"That speaks to the idea that more buyers have pulled out than sellers right now."
In the Hunter Valley (excluding Newcastle), dwelling values fell 0.3 per cent over July to a median of $833,051.
House values declined 0.5 per cent to a median of $860,027.
However, unit values strengthened, recording an uptick of 1.4 per cent to a median of $609,300.
Australia's HVI fell 0.7 per cent in July - the largest drop since December 2022 - with declines spreading to previously resilient capitals like Brisbane (-0.6 per cent) and Adelaide (-0.2 per cent).
Sydney and Melbourne continued to lead national declines, falling 1.4 per cent and 1.2 per cent, respectively.
Values in Melbourne peaked in November last year, while Sydney reached its highest point in January.
While regional markets have consistently outperformed the capital cities since the peaks of October 2025, the demand-driven loss of momentum has also hit these markets.
The combined regional index fell 0.2 per cent in July - its first decline since January 2023 - led by regional NSW (down 0.4 per cent in July).
