House prices fell in May, despite a hefty cut in official interest rates, although the drop in prices and rates improved home affordability.
Home values fell 1.4 per cent across capital cities during May, taking the drop over the 12 months to 5.3 per cent, figures released on Friday show.
The RP Data Rismark Survey showed home values had fallen 2.2 per cent so far this year.
That's despite the Reserve Bank of Australia cutting the cash rate by half a percentage point, the first cut since November, although the major banks did not pass on the official cut in full.
Rismark managing director Ben Skilbeck said falling house prices were a positive development for those looking to buy.
"The combination of interest rate reductions, declining home values and disposable income growth has significantly improved affordability," he said.
Melbourne property prices fell the most of all the capital cities in May, down by 2.7 per cent.
This was followed by Darwin, down 2.4 per cent, and Perth, down 1.7 per cent.
Adelaide was the only capital city to record a rise during the month, with home values up 1.2 per cent.
RP Data research director Tim Lawless said lower-value homes were holding their value better than premium properties.
"Premium dwelling values have fallen by minus 6.1 per cent over the 12 months ending April 2012 while dwelling values at the affordable end of the spectrum are down by just minus 1.5 per cent," he said,
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