CommSec chief economist Craig James says prices in Sydney and Melbourne remain 40-50% higher than the levels of 2012, despite recent falls.

James says prices in the two biggest cities are retreating to “fair value” but just where that lies for home prices “remains to be seen”.

James notes that Sydney and Melbourne home prices are still well above the August 2012 lows. Sydney dwelling prices are up 50% from their August 2012 levels, while Melbourne prices are 44% higher.

“The good news in the NSW and Victorian markets is that the unwinding of unsustainably high prices is occurring at a time when job markets are in the best shape in 40 years,” James says.

CommSec says that, meanwhile, Hobart is up 40%, Canberra is up 23% and Brisbane and Adelaide prices are both up by around 20%. Perth and Darwin prices have been hit by the ending of the resources boom over this period, James says.