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With the resources boom evaporating, so too are the high prices for West Australian properties, though so far the effect has been mostly at the high end of the market, rather than properties in the first home buyer market.

Values of $1 million-plus properties have fallen 20 per cent, with affluent suburbs seeing "Properties ... purchased as recently as a year ago … listed or sold below their original asking price".

House prices in WA were expected to keep falling as miners are forced to retrench staff, with Perth house prices expected to fall by between 8 per cent and 12 per cent this year.

In spite of this much of the lower end of the property market has held ground, held up by a surge in demand for cheaper homes and a tripling of the first-home buyers grant, according to the REIWA.

"Properties priced up to $400,000 in areas popular with first-home buyers have either been steady in price or fallen only very very marginally."

Perth home prices fell 4 per cent during the December quarter, with the yearly decline at 11 per cent.

The median price of Perth houses was $473,000 at the peak of the West Australian housing boom in December 2007, but a year later is now down to $418,000.

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First Home buyers appear to be responding to the Federal Government's boost to first-home buyer grants and recent interest rate cuts.

With the Federal Government's recent doubling of the first-home buyer grant for established homes to $14,000, and a tripled subsidy for newly built homes to $21,000, First Home borrowers made up 23.6 per cent of November’s home borrowing market, the highest recorded figure since 2002 and a significant rise from the 19.5 per cent share seen in October, according to official figures released by the Australian Bureau of Statistics.

The Reserve Bank of Australia cut interest rates by one percentage point in October, then a further 75 basis points in November, before again slashing rates in December by one percentage point, taking official cash rates to a six and a half year low of 4.25 per cent.

ANZ economist Alex Joiner commented that while owner-occupiers and first home buyers were being enticed into the market due to the rate cuts, the home building sector was still some way off a recovery "Confidence in the property market is still shaky and economic uncertainty is high," he said.

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In good news for first home buyers, better value may be on the way with the majority of property owners expecting the value of their homes to decline in the next quarter, according to a joint survey by the Mortgage and Finance Association of Australia (MFAA) and Bank West.

The survey recorded the highest level of pessimism since June 2006, reflecting the current economic outlook, with Western Australians the most pessimistic in believing home prices would continue to fall, followed by Victoria, NSW, and then Queensland. South Australians were more optimistic, with few believing their home lost value over the previous six months.

While home owners may be pessimistic, first home buyers are ready to seize opportunities, with 27.8 per cent of First-time buyers believing lower property prices make the current environment a good time to buy. Financial institutions have recorded substantial rises in inquiries from first time buyers, with some institutions seeing significant growth during December for home loans issued to first home buyers.

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A survey of residential builders by The Housing Industry Association found new home sales declined by 1.1 per cent in November 2008 despite hopes that lower interest rates and the increased First Home Owners Grant would boost activity in the housing sector. HIA Chief Executive - Association, Chris Lamont, said a general slowing of the economy and problems in gaining finance on new construction projects had resulted in softer activity in the latter half of 2008, with investors sitting on the sidelines. The HIA believes investment in some sectors of the housing market could be stimulated by doubling the depreciation allowance and making private investors eligible for the National Rental Affordability Scheme.

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