Home prices in Australia's two largest housing markets of Sydney and Melbourne are falling, and more falls are expected later in the year.

So far this year, home values are down 1.9 per cent in Sydney, and 0.5 per cent in Melbourne, the latest data from property analytics group CoreLogic shows. Prices have fallen 1 per cent across the five largest capital cities.

AMP's Shane Oliver predicts that Sydney and Melbourne property prices will fall another 5 per cent or so this year with further falls likely next year. Credit:Wayne Taylor

AMP Capital's chief economist Shane Oliver said the two largest cities had been a drag on the national housing market this year, weighed down by tightening of lending standards and more realistic price expectations by home buyers.

He predicts that Sydney and Melbourne property prices will fall another 5 per cent or so this year with further falls likely next year.