One economist has predicted that the Australian property market could experience a significant decline.

In an interview with the Herald Sun, Harry Dent - a US economist - described Australia's real estate sector as "the most over-valued in the western world".

He stated: "I think prices will go back down to where they were in mid-2000, to where young families can start affording a house again - so that could prove a good thing."

Mr Dent also said the property industry in Australia could see a crash similar to the one that occurred in Japan in the late 1980s.

The most recent figures published in the RP Data - Rismark Home Value Index showed that house prices in the nation's state capital cities fell by an average of 0.2 per cent in June compared with May.

Continue Reading Below

Year-on-year, capital values were down by two per cent in June, although some cities such as Brisbane and Perth saw larger falls of 6.3 per cent and 4.7 per cent respectively.