The peak real estate body wants the first-homebuyers grant to be returned to a flat rate, claiming the two-tier system has skewed and slowed the broader market.
The Real Estate Institute of WA has called on the State Government to use the May Budget to return to the old grant system of $7000 for all eligible first-homebuyers.
Changes in late 2013 boosted the amount to $10,000 for those building a new house and reduced the amount for those buying established property to $3000.
REIWA president David Airey said the two-tier system had led to an even split in the number of entry-level buyers in the two markets. In early 2013, two in three entry-level buyers had favoured established property.
In previous years, as many as 70 per cent of first-homebuyers preferred established homes.
Mr Airey said the trend towards construction had undermined sales in the second and third established home markets, too.
"When first-homebuyers buy a property, it means someone else moves into the second home market," Mr Airey said.
"It creates a multiplier effect. There is a rush that goes through the entire market."
He said the trend also contributed to urban sprawl, because entry-level buyers could not afford inner-city property.
But property developer Nigel Satterley called for the Government to maintain the two-tier system, claiming it had buoyed construction in WA.
Mr Satterley said residential construction had helped mop up many of the 20,000 construction workers who had lost jobs in the resources sector.
He believed metropolitan Perth was unlikely to spread further north, south or east in the next few decades but there would instead be infill in the outer suburbs.
Treasurer Mike Nahan stood by the introduction of the two-tier system in 2013.
He said it had added needed supply to housing stock and may have helped reduce rents.
He said the changes supported employment in residential building which had increased 22 per cent - or 2417 people - over last year, the strongest calendar year growth since 2007.
"Each new home under construction creates multiple jobs," Dr Nahan said.