HOME prices in Sydney dropped more than 4 per cent in the past year, a steeper fall than the national average, but a strong result amid financial crisis, economists said.

Confirmation that the property market is treading water came as official figures showed new loans to businesses are falling sharply, suggesting a rapid decline in investment.

The median house price in Sydney dropped 0.2 per cent in the three months to the end of March, taking the yearly fall to 4.1 per cent.

Unit prices rose about 1 per cent in the first quarter, but are down 1.2 per cent for the year, according to a report released today by Australian Property Monitors.

An APM economist, Matthew Bell, said house prices remained "surprisingly resilient" considering the financial turmoil.