The company’s research director Tim Lawless said Sydney and Melbourne were the star performers for capital gains.
“Sydney and Melbourne were the clear drivers for capital gains over the past year, with values up by 13.4 per cent and 11.9 per cent respectively over the 12 months ending January 2014,” he said.
However, he predicted the current growth cycle in these cities would wind down over the year due to poor yields, affordability constraints and an increasing supply of housing.
While Melbourne and Sydney saw the highest growth in rental value, they also had the lowest rental yields, according to an RP Data-Rismark index.
Gross rental returns for houses were 3.9 per cent in Sydney and 3.3 per cent in Melbourne.
Mr Lawless believes such a low-yield environment could be a disincentive to investors, who might seek out higher returns in other cities.
“With gross yields low in Melbourne and not a lot better in Sydney, together with the fact that both these markets are well advanced in their growth cycle, it would suggest that investment fundamentals in these markets are waning,” he said.
Nonetheless, Rismark CEO Ben Skilbeck said prices were unlikely to fall in the two major capitals.
“While a moderation in growth is expected for Melbourne and, to a lesser extent, Sydney, strong population growth, an increasing appetite for housing credit and positive consumer sentiment means we are unlikely to see price declines in the near term,” he said.
Mr Skilbeck pointed to strong house borrowing as a sign investors were taking a more active role in the market.
Across the capital cities, housing values climbed in the lead-up to January, according to the index.
The data shows capital city dwelling prices rose by 2.7 per cent in the three months to January.
Since the current growth cycle began in June 2012, combined cities values have increased by 13.2 per cent.
However, growth in the other capital cities was significantly lower than in Sydney and Melbourne.
“Excluding , every other capital city has recorded growth of less than five per cent over the past year,” Mr Lawless said.
Perth recorded growth of 6.9 per cent while Brisbane and Adelaide saw rises of only 3.8 per cent and 2.5 per cent respectively.
Darwin saw dwelling values appreciate by 4.6 per cent while Canberra saw a 2.7 per cent rise over the year.