Property prices in most capital cities including Perth have plummeted in the September quarter, with house and unit prices flattened or posting negative rates of return in the past 12 months.
Perth house and unit prices fell 3.4 per cent and 4.2 per cent respectively in the quarter, compared to September 2007, where house prices fell 6.7 per cent and unit prices declined 4.8 per cent.
Liam O'Hara, senior economist for national supplier of online property price information, Australian Property Monitors, said the latest figures show that price pressures are easing in most capital cities and that downward pressure on prices in the quarter was largely a result of the 7.25 per cent interest rate level before the Reserve Bank's first rate cut in September.
"The outlook for the residential property market will depend on the net effect of falling interest rates, a weakening economy and slowing demand for housing credit," she said.
"The property market is still historically over-inflated, with supply-side constraints placing a long term floor under prices. These factors remain serious barriers to affordability.
"Dramatic reductions in the official interest rate as witnessed in early October and November will lift confidence and help stabilise property prices in the short term.
"However, if economic growth continues to decline, feeding into significantly higher unemployment, then the outlook is less certain. Property prices and activity will drop and further official interest rate cuts may be needed."
In Sydney house and unit prices fell 1.7 per cent and 1.1 per cent respectively in the September quarter, while Adelaide house prices gained a modest 1.2 per cent and unit prices remained flat in the quarter.
Melbourne house prices remain steady while unit prices fell 2.3 per cent in the quarter, and in Brisbane, house and unit prices fell 5.2 per cent and 1.6 per cent respectively during the same period.
Ms O'Hara said over the next six months property prices would continue to flatten and even fall moderately.
"This is a good sign for potential buyers. Only when potential buyers believe prices have fallen enough, and the economy gains upward momentum, will confidence return to more positive levels," she said.
