Property buyers who have been priced out of the Perth market are now in a better position to grab a good deal as prices slipped into negative growth territory.
In July, the median house price dropped by 1.8% and lost a total of 4.6% over the quarter to reach $495,500 according to the latest Residex data.
Units did not fare well either, with the median price falling by 3.4% over the quarter to reach $388,500. Perth broke the $500,000 barrier exactly 12 months ago and achieved a maximum median value of $519,540 in April 2008.
"It's hard to pick the probable outcome in this market as it did move up very quickly," said John Edwards, founder and Chairman of Residex. "One could have expected it to follow the adjustment process seen in Brisbane, but perhaps Brisbane was lucky in that its adjustment was not in a climate of a credit crisis and a rapidly adjusting stock market.
"Will it correct by the level suggested by some analysts at 10%-plus? Our best guess based on the numbers is no," Edwards added. "However, this will depend on the level of speculative investment remaining in this market. Reductions in interest rates over the next few months are likely to save it and hence overall we don't see such a fall or any significant percentage as the most likely scenario."
All states and territories have also recorded flat or negative growth in the July 2008 quarter. House values in the ACT, Adelaide, Brisbane, Perth and Sydney all slid by -0.2% to -4.6% in the three months to July 2008 with Hobart remaining flat, Darwin increasing 0.2%, and Melbourne up 0.6%.
"Sydney still suffers and is providing the investor with the most opportunity to find the bargains. Ultimately, demand is going to drive this market as government policy isn't going to deliver the needed stock," said Edwards.
While pundits are now convinced that the RBA will reduce the cash rate by 0.25% at its meeting next month, Edwards said it is unlikely to fully flow into the economy and the consumer's pocket.
"The banks want to get their margins back up to the levels they previously enjoyed before market competition forced them down, when organisations like Aussie Home Loans entered the market," Edwards said.
The impact of this will prompt the RBA to make a reduction of more than 0.25%, "sooner rather than later", to have the effect that is needed, he added.
"Our markets are still precariously balanced, and provided the RBA makes the right move then they can still engineer a soft landing - but it's going to be difficult. It's not just about interest rates. It is about the volume of credit available to allow the population to bid for housing," he said.
"For those of us who are cashed up, opportunity abounds - the bargains are out there and among them there's some exceptional value."
