Home prices in Johor state, which takes in the huge Iskandar development zone, dipped in the second quarter for the first time in more than two years.
Prices of high-rise units - which have sprung up in large numbers recently in Iskandar - tumbled 13.5 per cent from the first quarter.
The figures are from Johor's House Price Index (HPI) in a recent Maybank IB Research report.
It showed that the overall index fell 1.6 per cent quarter on quarter - though it was still up 4.6 per cent from the second quarter last year.
The slide has been caused by the Malaysian government's cooling measures from January, said analyst Wong Wei Sum of Maybank IB Research.
The raising of the minimum price of property that can be bought by foreigners - from RM500,000 (S$195,000) to RM1 million - since May has hit demand as well, Ms Wong told The Straits Times.
Still, property consultants noted that while prices of newer projects are falling, secondary market prices remain robust.
Prices in newer developed estates have run up to an unsustainable level, leading to a large price difference between older and newer areas, they said.
"Prices of properties launched up till 10 years ago have been gradually rising over the past 10 years," said Mr V. Sivadas, executive director of PA International Property Consultants.
"But in Iskandar in the last five to 10 years, developers' pricing has shot through the roof."
Developers have been hiking prices "indiscriminately" in response to changes in the minimum value for property purchases by foreigners, Mr Sivadas added.
"The developers' market will eventually find its own level. If developers can't sell, they will have to be more innovative in marketing strategies or adjust pricing."
Demand for recent property launches has been softer than from the second half of 2012 to the first half of 2013, Ms Wong noted.
For example, by the end of September, the first phase of Guangzhou R&F's Princess Cove received about 46 per cent bookings for its 1,488 apartment units which were launched at the end of July. Half of its 79 retail lots were booked. The take-up rate for UEM Sunrise's Almas condominium in Puteri Harbour was 25 to 30 per cent as at the end of September, while Tropicana has yet to launch its high-rise units in Danga Bay.
Property prices are expected to stay weak or flat, especially for mixed-use and high-rise residential projects over the medium term, given the "more than ample" incoming supply by the end of next year, said Ms Wong.
A study by property consultancy Landserve says 18,718 high-rise residential units are set to be added by the end of next year, with 40,374 units more by the end of 2017.
Iskandar Waterfront Holdings is also said to be in talks with several foreign developers to sell some of its land in Danga Bay or Permas Jaya, which could raise fears of a housing glut in Iskandar, said Ms Wong.
Still, despite the gloom in the high-rise residential sector, the industrial and commercial property sector is still doing well in Iskandar, said Mr Wee Soon Chit, executive director of Landserve in Johor.
About two weeks ago, all 52 semi-detached and detached factory units in Phase 1 of the iBP@Nusajaya in the Southern Industrial and Logistics Clusters (SiLC) were sold on launch day - from RM3 million per unit on average. A week earlier, developer AME had sold all 52 three- and four-storey shop offices in Nusajaya Square 2, also in SiLC, from RM1.4 million per unit.
Said Mr Wee: "The perception that the property market has softened in Iskandar is mainly influenced by the performance of the high-rise residential sector, which is rather misleading as other sectors are still doing well."