TheAnalyst, you have some very good points there, and most of them I won't argue. However 3 of them I feel I have enough experience in to add.
3. Market irrationality is HUGE driving force. Look at what happened to Babcock and Brown. What happened during the 4 or so slaughter days to make the price drop 50%? .... Nothing. No credit default, no downgrading, heck, not even the debt review - the $7.50 debt review wasn't triggered until the 3rd day (of course this could have caused the 4th day of falls)
What happened in the 2 (possibly more) recovery days? Not much the $750m deal happened during a falling day, and some vague news that B&B will be selling it's Wind Infrastructure.
So don't discount the fact that market irrationality can be a more powerful driving force than fundamentals.
4. The market is pricing in further interest rate rises. Don't count on interest rates being peaked yet. I'd say 1 more, 2 at absolute most, but I'm happy to concede to you that those movements are trivial.
HOWEVER, history shows that the highest period of defaults don't happen until 12-18 months after the peak of the interest rate cycles. Assume March was the last one. We're lookng at March 2009 to August 2009 for the height of forced sales - that may not coincide with the bottom of pricing, but it's worth thinking about.
5. Strong in WA - and I know you said your analysis was in WA. However, all markets are linked. NSW job creation was more than 30,000 under expectation, on the latest figures - they expected about 10k growth, and got 20k loss instead. Perth and Sydney have been competing for highest median house price for a couple years now. If Sydney falls, forget strong fundamentals in Perth, sentiment will drop as well.
Anyway. I'm clearly not as well versed in the WA market as you are, but I feel my points of view here should provide some food for thought.
Although I said it was my perception on WA market, as you said all market was linked. I believe Sydney is also at the bottom. I believe market setiment is the main driving force to the market. Those get-rich-quick investors just wanted out at any price.
We will see the rate. I believe no more increase.