The property data, information and analyst service's Hedonic Home Value Index, released on August 1, found that house prices have dropped by 2.7 per cent in one month until July 31.

It follows after a 2.5 per cent drop in dwellings across the region in the same period, with a 1.1 per cent decline in the last three months for houses alone.

Despite the recent downturn, there was a 19.3 per cent increase in house prices over the last 12 months, with 11.2 per cent growth for units.

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CoreLogic economist Kaytlin Ezzy said it followed after "two years of extremely high value growth" in the region.

"While the recent fall may be concerning to some home owners... it's important to remember that this month's decline comes off the back of a 59.7 per cent trough to peak increase, adding approximately $500,000 to the typical value of a Southern Highlands dwelling," she said.

The economist said the growth has eased since May, 2021, and factors such as increased listings, rising costs of living and rate hikes have contributed to the downturn.

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The decline in values is expected to continue with the hike in interest rates, with the Reserve Bank of Australia announcing the climb in rates to1.85 per cent on August 2.

"The length and severity of the downwards phase of the housing cycle will depend on how quickly and to what level the RBA increases the cash rate, with financial markets now expecting the cash rate to peak in early 2023, with the potential for rate cuts in late 2023," Ms Ezzy said.

"While values across the Southern Highlands are expected to fall further in the coming months, it's unlikely they will fall back to their pre-COVID level."

The index revealed the median price of houses in the Southern Highlands is $1,332,814 and $892,601 for units.

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