New figures show the Perth housing market is soaring while homeowners in the nation's biggest market, Sydney, are sitting still and watching thousands of dollars stripped from their investment. The Australian Bureau of Statistics (ABS) found capital city house prices rose one per cent in the March quarter, to be up 3.6 per cent over the past year. But it is Perth underpinning it all, with prices there up 8.8 per cent during the past three months and a whopping 28.8 per cent over the full year. During the past two years, house prices in Perth have soared almost 50 per cent. The Perth market is being underpinned by the large amount of cash flowing into the state because of the commodities boom. Darwin's property market is also climbing, thanks to high prices for energy. Prices there are up three per cent for the quarter and 17.4 per cent over the year. Hobart, more attractive to people escaping high prices on the mainland, is also benefiting, with prices there up 3.4 per cent in the quarter and almost 10 per cent over the year. Sydney homeowners, who earlier this decade were laughing all the way to the bank on the back of soaring prices, are now closer to tears as the value of their investment slips away. Prices fell 1.2 per cent during the quarter and are now 3.1 per cent lower than they were a year ago. During the past two years, while every other property market has improved, Sydney prices have slipped more than seven per cent. All of the figures, however, were taken before the May interest rate rise and ahead of the surge in petrol prices which has eaten into consumer hip pockets. National Australia Bank's chief markets economist Rob Henderson said the overall price rise was unlikely to cause the Reserve Bank too much concern. "The rate rise in May can be expected to dampen house prices from the third quarter onwards," he said. Comsec chief equities economist Craig James said he expected the spectacular gains in Perth to slow down, simply as people price themselves out of the market. He said it would be the rental market, already tight, that would likely suffer in coming months - giving investors a chance to return to the construction market. "Investors and developers are likely to show greater interest in the residential market over the second half of 2006, pointing to increased construction of houses and apartments and higher prices," he said. Housing Industry Association executive director economics Simon Tennent said the expected dampening impact of higher interest rates and petrol was relatively muted because of the shortage of housing. He said rental properties were few on the ground, while builders faced high costs just to add to the nation's housing stock. "While no one wants large and rapid falls in house prices, pressure needs to be lifted off the housing sector by increasing the supply of affordable housing and attracting private rental investment," he said. "Lowering the cost of land and easing the tax and regulatory burden on Australia's building community would be a step in the right direction." SOURCE: AAP