Houses in Sydney’s inner city and eastern suburbs, along with apartments on the lower north shore, have taken the biggest hits as the city’s five-year property boom comes to an end.

But a continued influx of Chinese buyers is expected to keep a floor under property prices, with one in four new homes in NSW being snapped up by Chinese, according to a Credit Suisse analysis of NSW Revenue figures.

Sydney’s median house price fell 1.9 per cent to $1,167,516 in the three months to the end of September, making it one of the country’s worst performers, says Domain Group’s State of the Market report released on Thursday. Domain Group is owned by Fairfax Media, publisher of The Sydney Morning Herald.

But the median value of houses in the inner city and eastern suburbs tumbled by a supersized 6 per cent to $2.17 million.

The apartment market also took a hit, with the median Sydney price falling 0.8 per cent to $732,321. Units on the lower north shore tumbled 6.7 per cent to a median of $900,000. Over the year, unit prices on the north shore have flat-lined, rising just 0.1 per cent.

“The Sydney market has well and truly cooled,” said AMP Capital chief economist Shane Oliver.

While not foreseeing a “crash”, which he defines as falls of around 20 per cent, Dr Oliver said property values falling up to 10 per cent was possible.

The chief executive of the Grattan Institute, John Daley, said housing affordability was a major factor behind the price slump.

“House prices in Sydney have become very high relative to disposable income, and household debt relative to household income is at an all-time high,” he said.

This is not the first time Sydney prices have dropped. The median house price fell 3.1 per cent in the December quarter of 2015. But Mr Daley said that had been a different situation with subsequent interest rate cuts helping to revive the market.

However, continued demand for Sydney property from Chinese buyers is expected to underpin prices, according to Credit Suisse.

The NSW government’s foreign buyer surcharge and a crackdown by Chinese authorities have failed to stop the exodus of wealth from China’s burgeoning middle classes into the relatively safe haven of Western property markets.

Domain Group chief economist Andrew Wilson said the quarterly fall in prices was unsurprising amid lacklustre auction clearance rates and a crackdown on investors from the banking regulator.

“Chances are we won’t see prices grow again this year at least – the inner suburbs were holding the market up, but we’re now seeing signs of them easing as well,” he said.

Dr Wilson said a rise in listings – as more rush to sell their homes before the end of the year – could hasten the decline.

Buyer’s agents have also found conditions easing in the past few months after years of strong competition and a market that favoured vendors.

Among them is Propertybuyer chief executive Rich Harvey, who said the stabilisation in the market was long expected.

“It’s a levelling-off rather than a correction,” Mr Harvey said, adding that he did not anticipate another boom for “at least another seven years”.

He said there were nevertheless still “pie-in-the-sky” vendors who were yet to have revise their price expectations to be more realistic.

PK Property Group buyer’s agent Peter Kelaher also said sellers needed to be more pragmatic if they expected to secure a sale.

“Vendors still have their heads in the clouds with their expectations – the prices they want are over-the-top.

“There’s no doubt we’ve come off the boom, we’re back to a normal market.”

The data also recorded house and apartment rents stable over the quarter, at $550 a week, up from $530 and $525 a week year on year respectively.