Without wanting to blow my trumpet too loudly, it seems this prediction may be coming to fruition. Recent statistics released by RP Data highlighted that the median house price across Melbourne is now $501,500, down 6.2 per cent in the six months to July. Apartments fared slightly better, down 4.3 per cent to $425,000. Across Australia, capital city house prices fell for the seventh month in a row, down 3.4 per cent.

It was the top end of the market that suffered the greatest losses over this period. The first seven months of the year saw dwelling values in the most expensive capital city suburbs, drop 6.2 per cent. This compares with a much smaller 2.3 per cent fall across ‘middle priced suburbs’ and a 2.1 per cent decline in the cheapest suburbs. These statistics however, are not surprising considering that for the year ending June 2010, values in the top end housing market were up 12.2 per cent, compared with a rise of 7.8 per cent at the most affordable end.

As the most interest rate-sensitive sector of the economy, , the housing market will be the chief beneficiary of any decision made by the RBA to reduce interest rates. However with interest rates likely to remain on hold until at least mid 2012, there is unlikely to be any immediate impact on the  property market.

So what does all this mean for property investment? Well first of all, these statistics do not mean that certain pockets of the property market cannot provide positive returns for investors. It would be naive to suggest that just because the median property value has dropped,  every single property in Melbourne has reduced in value as this is not the case.

A quality asset is a quality asset, regardless of short term price fluctuations. 

Too often we get caught up with the short term value of an investment without taking a step back and taking a longer term view. Overall,  a blue chip property in a prime location is still likely to generate excellent returns for investors over the long term.