Dr Hawtrey said the banks' tightening on investor lending, slower migration, and the challenge of unaffordability are creating these strong headwinds.

Nationally, auction rates have cooled to 70 per cent, down from 71.2 per cent last week.

"There will not be any bubble bursting or a crash, we don't see it as a bubble anyway but a calming," BIS Shrapnel's Dr Hawtrey said.

Dr Hawtrey added that properties will stay on the market longer and trade will be less chaotic.

UNSW Business School's property economist Nigel Stapledon said "it is fairly clear the markets have topped out".

"The market always tops out. People are less confident. I was thinking of a cooling by the end of the year but it's come earlier," he said.

"The market did get a rush of blood and in some areas prices may even pull back 5 to 10 per cent … Prices can fall but the market will not crash."

'A lot of supply is coming in'


Mr Stapledon said the market is getting the message that "a lot of supply is coming in".

"And that's good that the market is informed. If not, there will be greater risk of a substantial price fall. But the real test is still coming because a lot of supply is yet to come."

Chinese apartment builder Chiwayland's director Tomas Simpson calls Sydney "an interesting market".

"Ultimately in Sydney we don't have a lot of land here. It's still going to go up … and based on our inquiry rates I think off-the-plan is still very solid," he said.

"Also, auctions and off-the-plan are very different. With off-the-plan the buyer can put down a deposit and then take time to get funding. This makes the buyer very comfortable."

"And with units they are based on on actual rates per square metre and people can see that. We are not selling as much emotions as at auctions."

Mr Simpson, whose company is building luxury apartments in Sydney's inner north suburb of Roseville with another Chinese developer, Longton, said foreign interests especially from the Chinese has not slowed, despite China clamping down on money outflows.

Corelogic RP Data's senior research analyst Cameron Kusher said buoyant new apartment sales were not always "clear signals".

"We won't really know how successful these projects are until they settle. Yes, plenty of people are buying these and there are lots of new apartments being built but settlement is the real test once it is revealed if these projects value up to their sale price," he said.

Meanwhile, markets in Melbourne, Brisbane and the rest of the country are reaching an equilibrium between supply and demand but there is no chance of a crash, BIS Shrapnel's Mr Hawtrey said.