Perth home prices used to be the highest of any Australian capital city, but now they're the cheapest

• Perth's median home price is now the cheapest of any Australian capital city. They used to be the most expensive.

• A number of factors has contributed to the underperformance of the Perth market over the past five years.

• RBA Governor Philip Lowe admits he's "having a bit of trouble putting the pieces together" as to why Perth prices continue to fall.

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Just over a decade ago, Perth had the highest median home price of any state capital city in Australia. However, now prices in the city are the cheapest of any capital, as seen in the chart below.

Posted on Twitter today by Tim Lawless, Head of Research at CoreLogic in Australia, it shows the change in median home prices across the state capitals dating back to 2003.

In 2006, at the peak of Australia's commodity price boom, prices in Perth were soaring, toppling Sydney as the most expensive housing market in the country.

However, a series of interest rate cuts from the Reserve Bank of Australia, along with strong population growth in Australia's eastern capitals, including net interstate migration away from Western Australia as the mining infrastructure boom unwound, has seen Perth prices underperform the trends southeastern state capitals since late 2014.

From the peak, Perth's median home price has now fallen by around 18% in nominal terms, or even larger when inflation is taken into consideration.

The combination of a strong lift in new housing supply in Perth earlier this decade, coupled with sluggish population growth and weaker economic conditions, has gradually seen Perth overtaken by Brisbane, Hobart and Adelaide in terms of median home prices.

More recently, the impact of tighter lending restrictions for borrowers, something that has also seen prices begin to fall across the country, led by declines in Sydney and Melbourne, has also weighed on Perth property values of late.

To date, there have been few signs that firmer commodity prices, and an expected lift in mining sector investment next year, has helped to limit price falls in the Western Australia capital.

"I went to Perth a couple times last year and I saw signs that it might be bottoming," RBA Governor Philip Lowe told parliamentarians last month.

"The labour market and housing market seem to be having trouble again... I am having a bit of trouble putting the pieces together."