Residential property prices continued to increase in most of Australia’s major cities in July, led by gains in Sydney and Melbourne, but the annual rate of growth in prices slowed across the country, the latest figures show. 

The latest data released by property consultant CoreLogic reveals that the average price of a home in Australia increased for the seventh consecutive month in July, fuelled largely by record-low borrowing rates for buyers. 

According to Corelogic’s house price index, property prices for the combined capital cities rose 0.8% in July, compared with an increase of 0.5% in June.

Yet annual growth in prices slowed to 6.1% in July, from 8.3% in June and a long way from last year’s peak above 11%.

Despite major concerns that the Australian property market is overheating, the Reserve Bank of Australia (RBA) opted to cut interest rates to 1.75% in May and is widely expected to slash rates further today (Tuesday).

The RBA has reportedly taken comfort from most of the price pressure being concentrated in Sydney and Melbourne, with the rest of the nation far more muted.

House prices in Sydney rose 1.3% in July taking the annual gain to 9.1%, while Melbourne recorded an increase of 1.1% month-on-month taking the annual increase to 7.5%. The average price of a home in Sydney now stands at A$775,000 (£446,000), significantly higher than the national level of A$570,000 (£327,700).

In contrast, prices fell in Brisbane, Darwin, Canberra and Perth in July. Home values outside the cities grew by just 1.4% in the 12 months to July.

Tim Lawless, CoreLogic’s Asia Pacific research director, commented: “The recent moderation in the rate of capital gains should be viewed as a positive sign that growth in dwelling values may be returning to more sustainable levels.”

Data from CoreLogic also reveal that rents fell in July, down 0.6% year-on-year.

Capital city rental yields slowed to an new historic low of 3.3% with Melbourne now recording the lowest gross yield for houses at 2.8%, while Sydney averaged 3.9% for apartments.