So far this year, house prices have fallen 2.6 per cent nationally and 4.9 per cent in Sydney, according to September's CoreLogic figures.

BIS Economics' Angie Zigomanis was the most accurate with his forecast of a 1 per cent drop nationally and 4 per cent fall in Sydney.

Mr Zigomanis said the figures were predicated on a tightening of the lending environment for investors, particular in Sydney, last year.

"A key driver in the Sydney boom had been the investor markets," Mz Zigomanis said.

"It's going to be important to see where sentiment goes from here on in - will investors and owner occupiers keep retreating for the market? That's the big question mark for us. On the other hand we still expect strong population growth in Sydney."

While several economists from other institutions expected tightened macroprudential policy to weigh on housing demand, it was to a much lesser extent.

HSBC predicted Sydney house prices to grow more moderately in 2018, compared to 2017, by between 7 and 9 per cent, while the expectation nationally was for growth of between 3 and 6 per cent.


NAB expected 4.3 per cent growth in prices across the country and 4.9 per cent in Sydney for 2018, while investment bank JP Morgan anticipated a more subdued result of 2 per cent nationally.

While investment bank UBS jumped the gun slightly by "ringing the bell and calling the top" of the market back in March 2017, it nevertheless expected prices to grow by between 0 per cent and 3 per cent in 2018.

But it's little wonder so many got it wrong as the perfect storm was only just starting to brew. Faced with higher taxes, demand from foreign buyers was softening, wages remained stagnant at near-record lows, a surge in new apartments hit the market adding to supply and then, to top it off, the federal government announced the banking royal commission.

Group chief economist for NAB Alan Oster said economists at that point in 2017 had underestimated how much financial conditions would be tightened while there had also been less money come from China than expected.

"Most of us would have also assumed wages would have picked up by now but they haven't," he said.

National house prices declined 2.7 per cent annually with Sydney leading the way.

Nevertheless Mr Oster said the fall in house prices should be put in perspective.


"I'd say the housing market is still pretty healthy. Sydney is still up 26 per cent, and Melbourne is up 33 per cent [from four years ago]," group chief economist for NAB Alan Oster said. "I see this as a mild mid-cycle adjustment."

Market predictions this year continue to fluctuate. Earlier this month Morgan Stanley revised its initial house price outlook of a 10 per cent fall from peak to trough nationally, to 15 per cent.

Meanwhile, NAB recently cut its housing price forecasts for Sydney and Melbourne for the second time in four months, citing a seven-year low in confidence from property professionals in both cities.

At the beginning of this year, already after the royal commission had kicked off and after several months of price falls, Macquarie analysts showed cautious optimistic for house prices, suggesting to clients that it was "very likely' house prices at a national level were again rising modestly.

"Dwelling price growth and activity are quite seasonal so the data must be seasonally adjusted to get a clear read on housing price trends," the note stated.