Australian residential property prices have plummeted during the June quarter, with Sydney and Melbourne leading the falls, according to the Australian Bureau of Statistics' (ABS) data released on Tuesday.

In the nation's eight capital cities, residential property sank 0.7 percent over the three month period, according to the data.

"Sydney recorded the fourth consecutive quarter of falling property prices (-1.2 percent), while Melbourne property prices fell 0.8 percent, the second quarter of price falls for the city," ABS chief economist Bruce Hockman said.

"The initial slowdown in these markets was spurred by regulatory changes and a tightening in the supply of credit to investors."

"A drop in investor demand over recent months appears to be adding to the slowing in housing credit growth."

Over the year to June, prices in Australia slipped 0.6 percent, making it the first annual decrease since 2012.

In Sydney alone, the harbor city saw a 3.9 percent pull back in prices for the year, the largest decline since the March quarter in 2009.

Tuesday's report comes just days after Martin North, the founder of Digital Finance Analytics, warned that over the next 12 months there could be a 40 percent slump in the real estate sector down under.

While many other economists dismiss the predictions as alarmist, North told Australia's 60 minutes program on Sunday, "we've got a debt bomb, a debt crisis and at some point it's going to explode in our face," he said.

"There's 1.22 trillion U.S. dollars held by the banks in mortgages for owner-occupiers and investors and that's about 65 percent of their total lending."

"That's higher than any other country in the Western world by a long way."

"There's probably no country in the world more susceptible to the ramifications of a housing crash than Australia. We are uniquely exposed at the moment."