Economists say there are clear signs the "super energy" of the Sydney housing market has passed.

Figures from the Domain Group show auction clearance rates are the lowest in three years.

Last Saturday's auction clearance rate plunged to 72.4 per cent, from nearly 90 per cent in May.

Domain senior economist Dr Andrew Wilson said it was a clear sign the city's property market is slowing.

"I guess the super energy of the Sydney market has now passed. The price growth that was recorded this year and over the last two years was unsustainable given particularly that interest rates have been flat for the last four months," he said.

Dr Wilson said the fall in clearance rates had been the most severe in the outer suburbs.

"A closer look at the figures does reveal that its outer suburban lower priced properties where clearance rates have fallen the most. Inner-city properties are still quite reasonable for a spring market," he said.

"There really isn't that driver any more to keep pushing up prices with falling interest rates, so a much more moderate outcome now for the Sydney market in prospect."

He said reduced activity by investors was also driving the change.

"We're also seeing higher interest rates for investors with that action by [the Australian Prudential Regulation Authority]," he said.

"The latest data shows investor lending activity down sharply in all states over July and in New South Wales it was down nearly 10 per cent, so reduced activity from investors particularly in those outer suburban areas in Sydney... that's part of the equation.

"We release our house price data report in just under a month. Forward tracking shows that that extraordinary level of growth which was over 8 per cent for the June quarter will certainly be a lot less over the September quarter."

The median price for a home in Sydney is now about $1 million, making the city among the most expensive in the world in which to buy.