House prices have suffered their largest monthly fall in five years, with the federal budget a likely contributor.
Prices declined in six of the eight capital cities in May, with Melbourne recording the biggest drop - 3.6 per cent - RP Data's monthly house price index shows.
CommSec chief economist Craig James said the federal budget may have been the catalyst for a pause after 12 months of rising prices.
"Home prices couldn't lift forever - at some point there had to be a correction and it seems the federal budget caused people to pause and take stock," he said.
RP Data's research director Tim Lawless said seasonal factors also played a role.
"Historically, housing market conditions have softened in April and May as the market rebalances from what is typically a seasonally strong first quarter," he said.
"We have been seeing signs that the housing market is at or approaching the peak of the growth cycle."
RP Data's index of capital city home prices dropped 1.9 per cent in May, the largest monthly fall since December 2008.
Darwin and Canberra bucked the national trend, with prices adding one per cent and 0.1 per cent respectively.
Despite the May fall, house prices are higher than a year ago across all capital cities, with Sydney leading the rise with a gain of 16.6 per cent.
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