Despite continued strong results in the major capital cities, a leading analyst has warned capital growth is on the brink of slowing.
The latest information from RP Data shows capital city dwelling values rose by 1.1 per cent over the three months to July.
Sydney, Melbourne and Canberra lead the charge, with gains of 2.0 per cent, 1.8 per cent and 2.1 per cent respectively.
However, RP Data research director Tim Lawless said peak conditions had passed in Sydney and Melbourne and growth trends were starting to ease.
In the six months to July, dwelling values rose by 3.7 per cent across all the capital cities.
In comparison, growth hit a high of 7.2 per cent in the six months to November 2013.
Mr Lawless said investors could expect capital growth to continue but the rate of acceleration was beginning to taper off.
“With interest rates remaining low and fixed rates seeing further downwards pressure, we are expecting that capital gains will continue into the foreseeable future,” he said.
“What is likely though is that the rate of capital gain will continue to reduce, particularly in those cities where affordability constraints are the most significant and rental yields are the lowest.”
In particular, he warned low-yield, highly priced environments in Sydney and Melbourne would discourage buyers.
In his view, the coming months will demonstrate the strength of demand in these cities.
“The real litmus test for the market will be how much buyer demand is apparent during the Spring selling season,” he said.
“Winter has seen above average auction clearance rates however, as listings inevitably rise sharply over the coming months this will create the greatest test for the Sydney and Melbourne housing markets in terms of how strong value growth will be.”