Prices will continue to slide down as mortgage restrictions start to bite.

Industry experts are expecting the price correction to drop home prices even lower as the industry starts to feel the largest regulatory credit crunch.

Citing a study by Endeavor Equities Strategy, The Australian Financial Review said the crackdown could slash loan values by up to 30% and would affect property prices.

“Our base case suggests expense ratios will increase sharply, serviceability ratios will decrease proportionately, and loan sizes and property prices will suffer in the order of 15% to 20% in real terms. Meanwhile, lower house prices would reduce the ability for stressed borrowers to trade out or finance," the study said.

Capital Economics chief economist Paul Dales shared a similar sentiment, predicting that there would be additional price cuts in cities like Sydney and Melbourne, where home values are 5.4% and 3% below their peak, respectively.

"Most worrying is that prices will soon be falling at an even faster pace. The further decline in the number of home sales in March — the latest month of reliable data — to a seven-year low was larger than the fall in the number of new listings," he told Business Insider Australia, suggesting that house prices in Australia's capital cities will soon be falling by 5% annually.

In an analysis on Macro Business, industry watcher Leith van Onselen said the market seems to be deteriorating at an increasing rate.

Aside from stricter lending standards and rising bank funding costs, current market conditions are also being influenced by the expiry of interest-only periods and the planned reforms on negative gearing and capital gains tax.

"These factors combined will continue to weigh on housing values and make investing in property a particularly risky proposition, especially in Sydney and Melbourne, where values are most over-valued, investors are more dominant, and auction clearance rates, prices, and investor finance growth are already falling," he said.