Home owners told no need for 'panicking' amid Sydney property slump

Interest rate hikes and proposed property tax changes have created uncertainty in the Sydney market. (ABC News: John Gunn)

Home values have fallen across Sydney, with buyer confidence low amid interest rate hikes and proposed property tax changes.

Real estate agents say buyers have reduced their budgets by up to 15 per cent, and homes are taking longer to sell.

Prices are expected to continue to decline, but a market crash remains unlikely.

Sydney has been leading a national property market slump, with home values in the city falling 0.9 per cent in May, according to Cotality data released this week.

Homes in areas most affected dropped in value between 1.4 and 2.6 per cent, with the median value for Sydney homes — including units — sitting at $1.28 million.

It followed a months-long cool down topped off by multiple interest rate hikes and changes to negative gearing and capital gains tax announced as part of the federal budget.

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Based in Sydney's inner west, Ray White Annandale licensee Tina O'Connor said there had been an obvious "softening" in home prices in recent months.

"I don't think we can deny that, particularly in some of the higher price brackets," she said.

"Prices have been pretty resilient compared to some areas because the inner west is pretty buoyant … but we have seen buyers become a bit more selective."

Ms O'Connor said some homes were taking longer to clear, but assured prospective sellers there was still movement in the market.

Tina O'Connor says there has been a softening across the market. (Supplied: Ray White Annandale)

"I don't think we should be panicking … because well-presented homes that are correctly priced from the beginning are still selling," she said.

"I'd expect the market to stay as is for a little while, maybe a little bit flat, but there's still transactions happening and still people buying and selling."

True Property managing director Michael Catalano said there was a noticeable drop in buyer confidence in the wake of the federal budget.

"I'm hearing from buyers on the ground that their budget to purchase a property has reduced around about 10 to 15 per cent, just due to the banks tightening their belts since the budget announcement," he said.

"Before the federal budget announcement, days [homes were listed