Sydney land prices fell 6.3 per cent in the December quarter – their first fall in two years and nearly three times the decline of the overall residential land market.

The fall in prices in the NSW capital, which outstripped the 2.3 per cent overall decline, put Sydney's median lot price at $450,000 – still the most expensive in the country, the latest HIA-CoreLogic Residential Land Report said.

"The first quarterly decline of Sydney land prices in two years reflects a culmination of several policies aimed at stemming demand for new residential development in the city," said CoreLogic commercial research analyst Eliza Owen.

Sydney's median lot price is still the most expensive in the country despite a fall in the December quarter. Rob Homer

"Combined with Australian limitations on foreign investment handed down in the 2016-17 budget, domestic banks are less willing to lend to individuals who source their income from overseas."

But the report, which also criticised the quality of state land market data for lacking detail, showed the further divergence between the country's regionalised housing markets. Melbourne's average lot price rose 10 per cent to a new high of $330,000 over the quarter, echoing a separate report by project marketers Red23 that put the city's median lot price at almost $350,000 after a gain of nearly $100,000 – or 39 per cent – in 12 months.