Property prices are yet to bottom out in Newcastle and Lake Macquarie, but real estate agents are hopeful investors will soon lead a slow but steady recovery.
Data from property analysts CoreLogic show the median house price across the two local government areas fell another 0.4 per cent in May and has now dropped 9 per cent since its peak a year ago.
Apartment prices, which slipped another 0.7 per cent last month, have plunged 10.7 per cent since their peak in April 2018.
The overall drop for units and houses combined was 0.5 per cent for the month and 9.2 per cent in the past year.
CoreLogic's May report shows the rate of decline slowing in the dominant Sydney and Melbourne property markets, although both were still in the red last month.
The firm said the demise of Labor's negative-gearing and capital-gains policies and the Reserve Bank's June cut in interest rates could stop the slide in house prices across the nation.
The Australian Prudential Regulation Authority proposed last month that banks could change the interest rate serviceability test from a flat 7 per cent to a 2.5 per cent buffer above the mortgage rate, making it easier for borrowers to gain credit.
But Newcastle property agent Scott Walkom did not expect a fast recovery.
"I think there's a lot of waiting and seeing from people," he said.
"There doesn't seem to be many investors around, and there doesn't seem to be many buyers pushing other buyers too much at auctions. It depends on the property."
He said many investors would wait for prices to stabilise then rise slightly before having the confidence that "we've reached the bottom".
"With interest rates coming back, it does make property more appealing as far as rental return goes. Rents in Newcastle haven't really dropped much.
"I think we may be through the worst and prices should recover, but I don't think it's going to be a quick recovery. It could be a slow, steady improvement."
Another agent, David Tanchevski, said buyer inquiry numbers had "turned on like a tap" after the May 18 federal election.
"We're starting to see more buyers in the market place and more competition for property again. Not like back to where it was, but a definite improvement," he said.
"We had an open house in Cardiff on the weekend and 16 groups went through that. Open house numbers over the past 12 months you might have been getting an average of two or three through.
"I think the wheel's starting to turn, but you won't see the best of that for another three to six months.
"When the market was red hot, we were probably having 70 per cent investor and 30 per cent owner occupier. Over the last 12 months it's probably been 10 per cent investors."
Mr Tanchevski said apartments were taking longer to sell than houses.
"The apartment side of things may still be a risk. There has been a rapid spike in apartments that have gone up around Newcastle and Lake Macquarie over the past five years.
"That's probably one of the more uncertain parts of the market for me. I think they will be slower to bounce back."
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