Victoria's property market managed to avoid falling into the doom and gloom projections, with prices falling only moderately, according to the latest report from the Real Estate Institute of Victoria (REIV).

Over the quarter, house values in Metropolitan Melbourne fell by 3.5% to $864,000, ending four consecutive quarters of continuous gains. Unit values declined by 2.5% to $621,000.

Despite these declines, the median prices of homes and units in the region are still higher than they were during the same period last year, up by 6.1% and 6.4%, respectively.

Regional markets performed better, with units setting a new quarterly record for gains. Over the past three months, units in regional markets posted a 13.6% growth in median value to $339,000. 

The median value of regional homes also held steady, recording a 0.1% increase.

REIV President Leah Calnan said prices have stayed firm despite the drop in sales volume, indicating the "underlying strength". Over the June quarter, the sales activity was down by 29%.

"Prices haven't tumbled. Any home up for sale in Victoria is swamped with interest from buyers. Prices have held despite transaction volumes being down, and these are historically unprecedented times," she said.

Calnan said appetite for property in the state remains and sellers should be encouraged to take advantage of the favourable market conditions.

"There has never been a better time to sell your home. With fewer properties up for sale demand is outweighing supply and is delivering great prices," she said.

The decision of the state government to reimpose lockdown measures in Melbourne could potentially hamper growth in sales activity over the next few weeks.

Tim Lawless, research director for CoreLogic Asia Pacific, said what happened during the first lockdown in the state capital could happen again.

"The previous lockdown period saw real estate agent activity across Victoria slump by almost 70% before gradually improving post-Easter, with a sharp rise in activity once lockdown policies were eased around mid-May," he said.

Andrew Hanian, senior economist at Westpac, said the lockdown also has a significant impact on the economy.

"These events will likely see around 25% of the national economy stall in the September quarter, with Melbourne accounting for about 20% and an additional 5% potentially affected," he said. "We anticipate some catch-up of activity in Melbourne during the December quarter, albeit a partial one."