AS PRICES in Sydney's prestige suburbs spiral down, a question prevails: will 2009 be a bear year or have the prices dropped enough to prompt a bull run?
Australian Property Monitors economist Liam O'Hara is a "bear for the short-term", predicting further falls of up to 14 per cent in areas such as Bondi, Mosman and Palm Beach, which come on top of steep declines last year.
Preliminary figures from APM confirm the median house price in Palm Beach fell from $2,512,500 in the year to December 2007, to $2 million in December 2008 - a 20.4 per cent drop. Mosman dropped from a median of $1.2 million to $865,000 - a fall of 27.9 per cent.
The optimists and pessimists are locking horns over the Sydney housing market's future, with bears forecasting more price falls and bulls arguing such doom and gloom will only depress the market further.
Even real-estate agents admit prices have declined steeply in premium suburbs.
Barrenjoey Properties principal Richard McDonagh says prices in wealth belt suburbs such as Palm Beach were off by 35 per cent in December as players in the financial markets were hit by the credit crunch, forcing them to sell holiday homes.
[W] estate agents principal Susan Lee says Mosman's best homes had already fallen in price "at least 20 per cent" through last year. She says there will be more price slides for the top-end suburbs that rose strongly during the past four years.
"Sydney will have nominal price falls of 10 per cent but it will depend on where you live because some suburbs will have price increases - mostly those that are the cheapest relative to other stock."
Mr O'Hara says outer suburbs in the west and south-west - where prices are less than $360,000 - are poised for strong growth, especially property close to trains, schools and shops.
Rismark International head of research Matthew Hardman agrees, saying prices will rise and fall in different Sydney suburbs.
He says property in the city's west and south-west is 25 per cent cheaper than it was four years ago.
"Those areas are now as affordable as they were back in 1998," he says.
Macquarie Group's head of property research, Rod Cornish, forecasts "moderate price falls" across Sydney. He says the suburbs that will fare best through a tumultuous 2009 will be in the cheaper, city fringe areas.
One optimistic bull is CommSec chief economist Craig James, who says conditions are ripe for great home-buying opportunities in the year ahead. Lower house prices than in previous years, falling interest rates and lower petrol prices will boost home affordability, he says.