Sharp falls in consumer confidence have begun to spill into the economy, with house prices in Australia's capital cities falling for the first time in 12 months, according to property analysts.

RP Data - Rismark's home value index showed a 1.9 per cent drop in May - the biggest slide since December 2008.

Consumer worries about the broader economy are starting to cool property prices.

Melbourne led the decline with a 3.6 per cent slumped, followed by Adelaide and Brisbane, which fell 1.8 and 1.7 per cent respectively.

Sydney also cooled with a 1.1 per cent decline but remains Australia's most expensive capital city, having a median home price of $678,500. This compares with $550,000 for Melbourne and $545,000 for the capitals combined.